Maris Research

ECB: New Inflation Target, Old Tools

Share on facebook
Share on facebook
Share on twitter
Share on linkedin

In a surprisingly early conclusion of its monetary policy strategy review, the European Central Bank (ECB) rolled out several changes that will likely keep monetary policy easier for longer.

The good news: The ECB adopted an easy-to-understand, symmetric (i.e., negative and positive deviations of inflation are equally undesirable) 2% inflation target. The not so good news: The ECB did little to explain how it will achieve 2% inflation, other than committing to “especially forceful or persistent monetary policy measures to avoid negative deviations from the inflation target.” This creates a credibility issue that we think will leave inflation expectations subdued.

To its credit, the ECB has achieved price stability, albeit at lower rates in recent years. Today, the Harmonised Index of Consumer Prices (HICP) sits at a level equivalent to a 1.7% inflation. The ECB now wants to achieve 2%. The difference between 1.7% and 2% might sound like splitting hairs to some, but for monetary policy that primarily uses the blunt tool of interest rates to affect consumer prices, the difference is big. To begin with, the 1.7% average inflation realised so far encompasses two halves: While inflation averaged 2% during the decade following the euro’s founding in 1999,

... continue reading 3rd party author's post at source website

order-1586392_1280

Can't Get Enough Freebies? Subscribe to our Newsletter!

We will send you free research and analysis summarized at the end of each month.

Leave a Comment

Newsletter Sign up

Top Posts

PLACE HOLDER FOR AD PAGE – SEE 18:– OF VIDEO.€

What is Flywheel?

notes-150587_1280

More Articles.

Jessica Dickler

More workers plan to quit as better job opportunities open up

The pandemic has caused a lot of people to reevaluate, particularly when it comes to work. In what’s been called the “Great Resignation,” roughly 1 in 3 workers are now considering leaving their job, while almost 60% are rethinking their career, according to a report by personal finance site MagnifyMoney.   After spending more than

Read More »
Cointelegraph By Arijit Sarkar

FTX wallet adds support for BUSD and BNB tokens on the Binance Smart Chain

In what seems like an ongoing streak toward market penetration, prominent crypto exchange FTX has launched support for Binance Smart Chain BEP-20 tokens within its wallet services. While no official announcement was made, FTX CEO Sam Bankman-Fried confirmed the development by saying: “Ftx.com/wallet now supports BSC for BUSD and BNB! (Withdrawals are live — I

Read More »

Get content like this sent directly to your inbox!

Follow OnceBurned

Share on facebook
Share on twitter
Share on linkedin
Scroll to Top