BCB's David says unanchoring of inflation expectations still exits, despite having improved considerably; this requires BCB to operate with a tighter interest rate level than it would if it did not exist
- Guidance remains valid.
- The word serenity in their communication is valid for interpreting market data.
- Serenity does not mean inaction.
- It is natural to imagine that if price of oil increases, it has inflationary characteristic.
- All of this will be taken into consideration when making decisions.
Context
BCB's David highlighting that inflation expectations are still unanchored suggests that tighter monetary policy remains necessary. This implies a cautious approach as persistently elevated inflation risks could drive rates higher than previously anticipated. It’s critical to monitor how energy prices might influence future decisions, especially given their inflationary impact.
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