What must the ECB do if it wants to be able to one day justify exiting its highly expansionary monetary policy?

T he prospect of core inflation remain ing below 2% for a long time in the euro zone forms the premise for our analysis . This means that if the ECB retains a 2% inflation target , and even more so if it switches to an average inflation target of 2% like the Federal Reserve, then it will never exit its highly expansionary monetary policy. Given the institutional constraints, it is inconceivable that the ECB will completely change objective (and switch for example to targeting nominal growth or liquidity growth). The only way for the ECB to not be condemned to conduct a highly expansionary monetary policy until the end of time is therefore to broaden the concept of inflation by adding inflation in asset prices (which may be complicated) or more simply full housing costs (including for homeowners), which would then factor real estate prices into the calculation of inflation. Indeed, the monetary expansion is likely to cause a sharp rise in real estate prices after the crisis.