Case for rate hikes much stronger than in 2011

The ECB’s rate hikes in 2011 were a mistake, not just because they exacerbated the widening in peripheral bond spreads. Underlying inflation was subdued and policymakers were too concerned with acting pre-emptively to contain inflation expectations. They could hardly be accused of that this time! Based on the outlook for inflation, the case for normalising monetary policy is now much stronger.

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