We face a situation where if the current shock remains contained in energy markets, it may have a limited effect on broader inflation. But if it intensifies or persists, the pass-through could accelerate.

Sets the stage for the policy dilemma: uncertainty about the shock's propagation.

We have followed a meeting-by-meeting, data-dependent approach without pre-committing to a particular rate path. We are prepared to make changes to our policy at any meeting.

Contrasts with 2022 when forward guidance limited flexibility; emphasizes current agility.

Our updated monetary policy strategy embeds a focus on risks and scenarios, given a world of more frequent supply shocks.

Explains the strategic shift to handle higher uncertainty.

Presented two illustrative scenarios: an 'adverse' scenario with a short, intense shock pushing inflation ~1pp higher in 2026, and a 'severe' scenario with a longer shock pushing inflation ~3pp higher in 2027, not returning to target within the horizon.

Quantifies potential inflation outcomes under different shock intensities, highlighting non-linear risks.

The appropriate policy response is graduated and context-specific: 1) Look through if shock is limited/short-lived. 2) Measured adjustment if large but not persistent overshoot. 3) Forceful/persistent action if deviation is significant and persistent.

Provides the ECB's reaction function framework for a supply shock.

It is too early to say where on the spectrum we will need to be. We are entering this shock from a good starting point: policy stance is broadly neutral, inflation on target, expectations anchored.

Indicates a wait-and-see stance but from a position of strength.

We will not act before we have sufficient information on the size and persistence of the shock and its propagation. But we will not be paralyzed by hesitation. Our commitment to 2% inflation is unconditional.

Final, decisive summary of the ECB's conditional readiness to act.