Stresses Data Dependency, But Not Time for Forward Guidance

Q: How long is ‘sufficiently long’ and what will make you rethink and cut rates? Is at 2% inflation, 2.5% inflation etc? Are you concerned about the rise in yields and potential fragmentation?

• A: We shall be data dependent. At this point after 10 successive hikes, now is not the time for forward guidance. We have acknowledged that our assessment in September has been confirmed. Data has reinforced our assessment of the situation and we have applied our three criteria for determining the policy setting.
• When to cut rates was not discussed at all and such a debate is premature. Labour cost, wages, profits are critically important to determine the inflation outlook. We have to be steady and hold.
• External tightening is not directly relevant to the fundamentals of the euro area economy, but are a tightening impact nonetheless. That is a spillover that we take into account that are compounded with other elements are that bringing inflation down.