ECB Nominee Lagarde Supports Push to Clarify Inflation Goal
The European Central Bank’s president-to-be backed the idea of reviewing the institution’s price-stability target and how to communicate the institution’s intentions.
“We need to better clarify the framework,” Christine Lagarde told European Parliament in Brussels on Wednesday. “I would certainly be encouraging that movement.”
Finnish Governor Olli Rehn and Bank of Spain Governor Pablo Hernandez de Cos have both called for a review of the ECB’s monetary policy framework, noting that the U.S. Federal Reserve is doing the same. Central bankers in developed nations around the world have struggled to hit their inflation goals since the financial crisis despite massive monetary stimulus, undermining their credibility.
President Mario Draghi has said officials want to make it clearer that they take a “symmetrical” approach to their goal. Lagarde, who is due to succeed Draghi on Nov. 1 noted the imprecise definition of keeping inflation “below, but close to, 2% over the medium term.”
She suggested that while intentional vagueness may be appreciated by central-bank officials, it may be unclear to the wider public. She cited comments last month at a Fed symposium in Jackson Hole, Wyoming, asking “would anyone on the street understand why we spend so much time on trying to define close to, but not more than 2%?”
“Many things have changed since 2003” when the ECB last reviewed its framework, Lagarde said.
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