Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Inflation: Drivers and Dynamics Conference 2024 organised by the Federal Reserve Bank of Cleveland and the ECB

Cleveland, 24 October 2024

Introduction

My aim today is to provide an update on underlying inflation in the euro area.^[1] The concept of underlying inflation plays a central role in the conduct of the ECB’s monetary policy: our interest rate decisions are based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. This three-pronged reaction function complements the traditional focus on the inflation forecast for inflation-targeting central banks with the signals embodied in underlying inflation measures, while also incorporating the evolving evidence on the strength of monetary policy transmission in the calibration of the monetary stance. This pragmatic approach…