The ECB’s price stability framework: past experience, and current and future challengesMartina Cecion,
Günter Coenen,
Rafael Gerke,
Hervé Le Bihan,
Roberto Motto,
Pablo Aguilar,
Viktors Ajevskis (),
Sebastian Giesen,
Ugo Albertazzi,
Niels Gilbert,
Alexander Al-Haschimi,
Sandra Gomes,
Friederike Bornemann,
Gavin Goy,
Claus Brand,
Adriana Grasso,
Giacomo Carboni,
Christoph Grosse-Steffen,
Martina Cecioni (),
Markus Haavio,
Lena Cleanthous,
Felix Hammermann,
Mathias Hoffmann,
Agostino Consolo,
Jonas Hölz,
Giuseppe Corbisiero,
Samuel Hurtado,
Luca Dedola,
Patrick Hürtgen,
Desislava Andreeva,
John Hutchinson,
Michael Dobrew,
Michael Ioannidis,
Stéphane Dupraz,
Geoff Kenny,
Michael Ehrmann,
Stephen Kho,
Stephan Fahr,
Daniel Kienzler,
Erwan Gautier,
Malte Knüppel,
Dimitris Georgarakos,
Christoffer Kok,
Jarmo Kontulainen,
Ansgar Rannenberg,
Mika Kortelainen,
Annukka Ristiniemi,
Joost Röttger,
Ana Isabel Lima,
Alberto Locarno (),
Sergio Santoro,
Adriana Lojschova,
Alexander Scheer,
Matjaz Maletic,
Sebastian Schmidt,
Alberto Martin,
Jan David Schneider,
Julien Matheron,
Guido Schultefrankenfeld,
Magali Marx,
Ifigeneia Skotida,
Falk Mazelis,
Michel Soudan,
Aidan Meyler,
Arnoud Stevens,
Emanuel Mönch,
Michael Sturm,
Carlos Montes-Galdón,
Dominik Thaler,
Andrea Giorgio Tosato,
Kalin Nikolov,
Oreste Tristani,
Galo Nuño,
Maria Teresa Valderrama,
Dimitris Papageorgiou,
Henning Weber,
Lora Pavlova,
Raf Wouters,
Adrian Penalver,
Giordano Zev,
Massimiliano Pisani and
Arthur Saint Guilhem
No 269, Occasional Paper Series from European Central Bank Abstract: The ECB’s price stability mandate has been defined by the Treaty. But the Treaty has not spelled out what price stability precisely means. To make the mandate operational, the Governing Council has provided a quantitative definition in 1998 and a clarification in 2003. The landscape has changed notably compared to the time the strategy review was originally designed. At the time, the main concern of the Governing Council was to anchor inflation at low levels in face of the inflationary history of the previous decades. Over the last decade economic conditions have changed dramatically: the persistent low-inflation environment has created the concrete risk of de-anchoring of longer-term inflation expectations. Addressing low inflation is different from addressing high inflation. The ability of the ECB (and central banks globally) to provide the necessary accommodation to maintain price stability has been tested by the lower bound on nominal interest rates in the context of the secular decline in the equilibrium real interest rate. Against this backdrop, this report analyses: the ECB’s performance as measured against its formulation of price stability; whether it is possible to identify a preferred level of steady-state inflation on the basis of optimality considerations; advantages and disadvantages of formulating the objective in terms of a focal point or a range, or having both; whether the medium-term orientation of the ECB’s policy can serve as a mechanism to cater for other considerations; how to strengthen, in the presence of the lower bound, the ECB’s leverage on private-sector expectations for inflation and the ECB’s future policy actions so that expectations can act as ‘automatic stabilisers’ and work alongside the central bank. JEL Classification: E31, E52, E58 Keywords: effective lower bound; euro area; European Central Bank; monetary policy strategy; price stability (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbops:2021269 Access Statistics for this paper More papers in Occasional Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC. |
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