Isabel Schnabel: Monetary policy in a world of overlapping shocks

Inflation is back and weighing once again on people’s everyday lives. Just as the euro area was putting the post-pandemic inflation surge behind it, new shocks have hit. For monetary policy, this sequence of shocks poses challenges. It can affect the behaviour of households and firms, the formation of inflation expectations and, ultimately, the persistence of inflation. [ 1 ] The ECB has adapted to this shock-prone environment in two ways.