Monetary policy: Back to normal?

Only a few weeks ago the markets practically took it as read that the European Central Bank would reduce its key interest rate yet again in 2013. In the wake of ECB president Draghi's press conference at the beginning of January, however, such expectations have all but vanished.

Does this mean that a normalization of monetary policy, and possibly even a genuine interest rate policyturnaround, is on the cards? We must not forget that the current situation, where the key rate is hovering around zero, well below the rate of inflation, was the result of a decisive reaction on the part of the ECB to the escalating crisis that threatened to jeopardize monetary union. Even though risks remain, there are clear signs that the debt crisis is easing. 

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