Should the ECB’s inflation objective be reviewed?
There are grounds for calling into question the ECB’s inflation objective (2%) in two ways: Should it be changed? There have been suggestions both to raise it (4%?) to be able to lower nominal interest rates more in the event of a recession; and to lower it (1%?) because equilibrium inflation has become lower in contemporary economies. But the problem is that inflation can no longer be controlled by monetary policy: it is unable to drive it up from 1% to 2%, let alone from 1% to 4%; announcing a target of 1% would just signify that the ECB is giving up its effort to change inflation; If inflation can no longer be controlled by monetary policy, the inflation objective must be abandoned. Other objectives are conceivable and reasonable: nominal growth, or, with a return towards the origins of central banks, simply financial stability.