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Clare Lombardelli, chief economist at the OECD, said the ECB was facing a difficult job of deciding when to stop raising interest rates, as structural changes since the last rate hike cycle made it difficult for the central bank to assess the impact on the real economy. impact, which clouded the economic outlook. “The transmission of monetary policy is very uncertain and it is difficult to judge the impact and when that impact will be at its maximum.”
Europe is particularly challenged now as core price pressures, stripping out volatile factors such as energy, remain fairly strong even though headline inflation measures are falling. This is a key point of contention among policymakers. ECB Vice-President Guindos said last week that most underlying price indicators “have begun to show some signs of softening”, but hawkish Governing Council Nagel insisted that underlying inflation remained a concern.
