Contribution by Philip R. Lane, Member of the Executive Board of the ECB, to the panel on “Reassessing the effectiveness and transmission of monetary policy” at the Federal Reserve Bank of Kansas City Economic Symposium

Jackson Hole, 24 August 2024

Introduction

My aim in this contribution is to provide a euro area perspective on the effectiveness and transmission of monetary policy.^[1] As expressed in the monetary policy statements of the ECB’s Governing Council, the aim of monetary policy tightening has been to deliver a timely return of inflation to the medium-term two per cent target by dampening demand and guarding against the risk of a persistent upward shift in inflation expectations. Even if sectoral shocks had played an important role in triggering the initial 2021-2022 inflation surges, monetary policy tightening was necessary in order to contain domestic demand and to signal clearly to price and wage-setters that monetary policymakers would not tolerate inflation…