Report
Patrick Artus

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.
Provider
Natixis
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.

 

Analysts
Patrick Artus

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