DAVOS, Switzerland/HELSINKI (Reuters) – The European Central Bank should adopt a simple inflation target of 2% and scrap its current “below, but close to, 2%” formulation which can confuse consumers and policymakers alike, two ECB rate-setters said on Friday.
The ECB has lagged its goal for price growth for years despite an aggressive stimulus policy of sub-zero rates and massive bond purchases.
Review - Aim
It has now embarked on a year-long review that will see it redefine that aim, how to achieve it and communicate it.
Speaking the day after the official launch of the review, Dutch governor Klaas Knot and his Finnish counterpart Olli Rehn both signaled their preference for a 2% target.
Concept - ?close - ?below - Knot - Panel
“It is not an easily communicable concept that we currently have a ‘close’ and a ‘below’,” Knot said during a panel discussion at the World Economic Forum.
“The outcome should be that we have an inflation objective that everyone on the Governing Council explains in identical terms.”
Knot - Policy - Hawks - ECB - %
Knot, one of the most outspoken policy hawks at the ECB, has proposed adopting a 2% target with a tolerance band around it – a move that would lower the pressure...
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