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Policy Rate Primary Tool, More Needs To Be Done

ECB
  • Q: On QT: what will determine the pace of APP, inflation outlook, or what the market can digest? What of market pricing?
  • A: We clearly see the policy rate as the primary tool to return inflation to 2%. The QT is working not in the background, but to complement / align with key monetary policy tool. So there is no element of monetary policy stance associated with the reduction of the size of our balance sheet.
  • Our staff projections that embed market expectations of our terminal rate do not allow a return to the 2% inflation target that we have, in a timely manner. So more needs to be done.

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