Nowotny Favors Flexible ECB Inflation Target, Handelsblatt Says

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European Central Bank Governing Council Member Ewald Nowotny said he favors having more flexibility in reaching the institution’s inflation target, according to Handelsblatt.

“I believe it would be sensible to have a bit more flexibility, like the Israeli or Czech central banks have done,” the newspaper cited Nowotny as saying in an interview. He supports keeping the ECB’s 2% inflation target, “but with a corridor of 0.5% or 1% above or below.”

The ECB is preparing “something like” the Federal Reserve’s review of its monetary policy strategy, Nowotny said, according to Handelsblatt. The newspaper didn’t provide further information about the review, beyond saying that it makes sense given personnel changes at the ECB this year.

Nowotny also said that it’s important to consider the structure when discussing potential exemptions from the ECB’s negative deposit rate, known as tiering. “If it would be a system like in Switzerland, where especially small banks with traditional business models would benefit from cost relief, then I think that has a certain justification,” the newspaper cited him as saying.

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