Philip R Lane: The transmission of monetary policy

Speech by Mr Philip R Lane, Member of the Executive Board of the European Central Bank, at the 7th SUERF - CGEG|Columbia|SIPA - EIB - Société Générale Conference on "EU and US Perspectives: New Directions for Economic Policy", New York City, 11 October 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
12 October 2022


In our September monetary policy meeting, the ECB's Governing Council communicated that, over the next several meetings, we intend to raise our key policy rates towards levels that will ensure the timely return of inflation to our two per cent medium-term target.

In identifying the appropriate levels for the key policy rates, a range of factors must be considered. First, an assessment of the medium-term outlook for inflation is required: the quarterly staff macroeconomic projection exercises provide important foundations, while each meeting also draws on wide-ranging overviews of the latest economic, financial and market developments in order to develop an assessment of both the most-likely medium-term inflation path and the balance of risks around that path. Second, this assessment forms the basis for calculating the monetary policy path that is required to eliminate in a timely manner the gap between the projected inflation rate (that would be expected to materialise if monetary policy were not modified) and the two percent inflation target, while also narrowing the distribution of inflation risks around the most-likely path.