Report
If nothing changes, the ECB will have no choice but to change objective, whether explicitly or de facto
In the euro zone, core inflation: Is no longer cyclical in the short term; No longer varies with the long-term money supply. Headline inflation therefore varies mainly with energy prices. If this situation persists, it will no longer make sense for the ECB to have an inflation tar get, whether it be short to medium term or long term: the central bank can no longer control inflation. It is well known that it is almost impossible to change the European treaties and the ECB’s mandate. Yet there is a need for discussion around the ECB’s objective, if it can no longer be an inflation target; at the very least, the ECB will have to de facto change its objective. Ideally, the new objective would be nominal growth or a regular liquidity supply; in practice, it risks being the long-term interest rate because of the risk of a loss of solvency among the euro-zone countries.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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