ECB Official Calls for Accepting Inflation Overshoot, FT Reports

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The European Central Bank should change its policy and accept an overshoot of its inflation target to make up for years of sluggish price growth, the Financial Times reported, citing Bank of Finland Governor Olli Rehn, who is also a member of the ECB Governing Council.

Changes in the euro area’s labor market and world economy had weakened wage inflation pressures, and it “makes sense” to accept a certain period of overshooting while taking into account the history of undershooting, Rehn said, according to the report.

A focus on full or maximum employment makes sense in the current context of a lower natural rate of interest, the report cited him as saying.

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