ECB Has 'Option to Act Decisively' on Inflation: Lagarde

The video discusses the complexity of economic structures and strategic dependencies, highlighting the uncertainty in inflation returning to medium-term targets. It emphasizes the need for a determined and sustained approach, incorporating gradualism and optionality. The euro area's unique institutional setup, with soon-to-be 20 national financial markets and fiscal policies, presents challenges in policy transmission. Flexibility is crucial in normalizing monetary policy to ensure price stability in a high-inflation environment.

What approach is suggested to handle uncertainty in inflation targets?

• Act quickly and decisively

• Ignore the uncertainty

• Wait for more data

• Adopt a gradual and flexible approach

How many countries will soon be part of the euro area?

• 20

• 19

• 21

• 18

Which country is set to join the euro area as the 20th member?

• Romania

• Hungary

• Croatia

• Bulgaria

What is a potential risk of the euro area's institutional setup?

• Lack of economic growth

• Excessive fiscal coordination

• Uneven transmission of monetary policy

• Over-reliance on a single currency

Why is flexibility important in normalizing monetary policy?

• To decrease interest rates

• To increase inflation

• To ensure policy stance and price stability

• To promote fiscal policies