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The ECB’s new inflation target from a short- and long-term perspective

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  • BENIGNO, Pierpaolo
  • CANOFARI, Paola
  • DI BARTOLOMEO, Giovanni
  • MESSORI, Marcello

Abstract

The ECB’s target was recently revised, specifying that the 2%-inflation-rate threshold must be applied symmetrically and with a medium-term orientation. In the current phase, characterized by high inflation rates and a growing risk of stagnation in the euro area, this revision of the monetary policy strategy is crucial for explaining the recent decisions of the ECB and forecasting their possible evolution. However, monetary policy can only become one of many policy tools in the euro area. Therefore, there is room for a compelling policy mix necessary to control excessive inflation and support the European economy’s medium-term sustainable growth.

Suggested Citation

  • BENIGNO, Pierpaolo & CANOFARI, Paola & DI BARTOLOMEO, Giovanni & MESSORI, Marcello, 2023. "The ECB’s new inflation target from a short- and long-term perspective," Working Papers 2023006, University of Antwerp, Faculty of Business and Economics.
    • Handle: RePEc:ant:wpaper:2023006
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    References listed on IDEAS

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    1. Bobeica, Elena & Sokol, Andrej, 2019. "Drivers of underlying inflation in the euro area over time: a Phillips curve perspective," Economic Bulletin Articles, European Central Bank, vol. 4.
    2. Brand, Claus & Bielecki, Marcin & Penalver, Adrian, 2018. "The natural rate of interest: estimates, drivers, and challenges to monetary policy JEL Classification: E52, E43," Occasional Paper Series 217, European Central Bank.
    3. Sungki Hong & Hannah Shell, 2019. "The Global Decline of the Natural Rate of Interest and Implications for Monetary Policy," Economic Synopses, Federal Reserve Bank of St. Louis, issue 4, February.
    4. Cecion, Martina & Coenen, Günter & Gerke, Rafael & Le Bihan, Hervé & Motto, Roberto & Aguilar, Pablo & Ajevskis, Viktors & Giesen, Sebastian & Albertazzi, Ugo & Gilbert, Niels & Al-Haschimi, Alexander, 2021. "The ECB’s price stability framework: past experience, and current and future challenges," Occasional Paper Series 269, European Central Bank.
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    Cited by:

    1. Tavares Garcia, Francisco & Cross, Jamie L., 2024. "The impact of monetary policy on income inequality: Does inflation targeting matter?," Finance Research Letters, Elsevier, vol. 61(C).

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    Keywords

    European Central Bank; Inflation expectations; Stagflation; Policy mix;
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