The ECB has taken forceful action in response to the unprecedented surge in euro area inflation. We have embarked on the fastest tightening cycle in our history, raising our key policy rate – the deposit facility rate – from -0.5% to 3.5%, and started reducing the size of our balance sheet. Our actions are being swiftly transmitted to borrowing conditions, slowing the pace of credit creation. Inflation has started to come down from its historically high level, largely reflecting the sharp drop in energy prices. Underlying inflation has also moderated recently, but it has proven more persistent than expected. Despite ... (full story)