Speech by Christine Lagarde, President of the ECB, at The ECB and its Watchers XXIV Conference, organised by the Institute for Monetary and Financial Stability, Goethe University, Frankfurt am Main

Frankfurt am Main, 20 March 2024

Since the pandemic, monetary policymakers have been facing an exceptionally complex environment. As inflation rose, we were confronted with profound uncertainty about how far it would go and how widely it would spread across the economy. And even as inflation has eased, uncertainty about its persistence has remained.

The potential costs of mis-calibrating policy have been high, which is why we had to employ a policy framework that minimises the risk of mistakes. And we have done so by building our reaction function around three criteria: the inflation outlook, the dynamics of underlying inflation and the strength of monetary transmission.

Though we conceived these criteria when we had low visibility of future inflation, they have also helped guide our…