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Inflation, Price Stability, and Monetary Policy: On the Legality of Inflation Targeting by the Eurosystem

In: Inflation and Deflation in East Asia

Author

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  • Helmut Siekmann

    (Joahnn-Wolfgang-Goethe-Universität Frankfurt am Main)

Abstract

The term “inflation” is never used by the primary law of the European Union when unfolding tasks, objectives, and instruments of monetary policy. Only by re-defining its primary objective “maintain price stability” could the Eurosystem construe an “inflation target” as its legal goal in this way, eschewing to fall back on Article 127(5) TFEU, which would also demonstrate this aberration when interpreted correctly. To sum up, inflation targeting, as a task, competence, or objective of the Eurosystem, is—legally—highly questionable according to the common standards of interpretation, if it would imply striving for an increase of price levels greater than zero. It might, however, be safe to predict that the Court of Justice of the European Union would disagree.

Suggested Citation

  • Helmut Siekmann, 2023. "Inflation, Price Stability, and Monetary Policy: On the Legality of Inflation Targeting by the Eurosystem," Financial and Monetary Policy Studies, in: Frank Rövekamp & Moritz Bälz & Hanns Günther Hilpert & Wook Sohn (ed.), Inflation and Deflation in East Asia, chapter 0, pages 125-146, Springer.
    • Handle: RePEc:spr:fimchp:978-3-031-27949-2_8
    DOI: 10.1007/978-3-031-27949-2_8
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    References listed on IDEAS

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    1. Feld, Lars P. & Fuest, Clemens & Haucap, Justus & Schweitzer, Heike & Wieland, Volker & Wigger, Berthold U., 2021. "Die geldpolitische Strategie der Europäischen Zentralbank: Was geändert werden sollte und was nicht," Kronberger Kreis-Studien 67, Stiftung Marktwirtschaft / The Market Economy Foundation, Berlin.
    2. Karl Whelan, 2021. "Central banks and inflation: where do we stand and how did we get here?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 18(3), pages 310–330-3, December.
    3. Nelson, Edward & Nikolov, Kalin, 2004. "Monetary Policy and Stagflation in the UK," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 293-318, June.
    4. Ashoka Mody, 2014. "Did the German court do Europe a favour?," Working Papers 840, Bruegel.
    5. Jürgen Matthes & Markus Demary, 2013. "Überschreitet die EZB mit ihren Staatsanleihekäufen ihr Mandat?," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 93(9), pages 607-615, September.
    6. Helmut Siekmann, 2015. "The Legality of Outright Monetary Transactions of the European System of Central Banks," Financial and Monetary Policy Studies, in: Frank Rövekamp & Moritz Bälz & Hanns Günther Hilpert (ed.), Central Banking and Financial Stability in East Asia, edition 127, pages 101-123, Springer.
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    Cited by:

    1. Josefine Quast & Maik H. Wolters, 2023. "The Federal Reserve's output gap: The unreliability of real‐time reliability tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(7), pages 1101-1111, November.

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