Inflation and the effects of monetary tightening in the euro area

After inflation in the euro area started to rise to unprecedented levels, the ECB has tightened monetary policy rapidly. We analyse the implications of high inflation and the effects of monetary policy tightening on the euro area economy. While financial conditions have already tightened significantly, the size and timing of the impact on the real economy is more difficult to assess. Distributional effects can be expected to be modest and should not be a major concern for monetary policy.