ECB's Lane Says Normalization Timeline Is Uncertain

The video discusses the importance of gradualism in policy normalization, emphasizing the uncertainty in reaching a neutral rate due to feedback loops and economic conditions. It highlights the adjustments in market interest rates and lending margins during the normalization path. The video also addresses the uncertainties caused by the war in Ukraine, energy shocks, and post-pandemic recovery, which affect economic stability. It concludes with the need for data-dependent policy decisions to ensure price stability and inflation control.

What does it mean for policy decisions to be data dependent?

Explain the significance of the 2% inflation target in monetary policy.