ECB inflation target

ECB bonds

ECB Raises The Bar For Normalisation In The Short-Run, Flexibility Is The Key For Policy

Monex Europe | Today’s announcement by the European Central Bank can be perceived as net dovish in the short-term by markets, as the shift from an asymmetric target to a new symmetric 2% inflation target gives the central bank ample room to run accommodative monetary policy for longer without having to fight markets. Previously, the ECB’s inflation target was set at “below, but close to 2%”, which contributed to the eurozone’s structural issues with low inflation for years. By changing this target to a symmetric target, which means any undershoots and overshoots would be equally undesirable, the central bank moves the bar slightly upwards for inflation before policy is required to tighten.

inflation eurozone

European Inflation: ECB Should Dovish When It Becomes Hawkish

Bruno Cavalier (Oddo-Bh) | In January, inflation in the Eurozone jumped by 1.2 points to 0.9% yoy, largely due to the increase in VAT rates in Germany. Later this year, the ECB’s target inflation rate of 2% is likely to be exceeded. After the compression of some prices in 2020, the base effects are expected to be very strong. The ECB has no reason to react to a bump in inflation, but since Christine Lagarde has accustomed us to a convoluted message to please the “hawks”, we cannot exclude the possibility of the ECB getting muddled up in its communication.

Fed monetary policy

FED, ECB monetary policy: communication counts when doubts increase

The minutes released by the FED and the ECB last week shared concern about how to inform about their monetary stance. They fear unsettling the markets should investors wrongly interpret the messages conveyed to them.  When you lack a clear policy perspective, the best thing you can do is to manage communication in a fairly tight way.

ECB's interest rate policy

The impact of the ECB’s policy of zero interest rates

José Luis M. Campuzano (Spanish Banking Association) |The ECB believes the net effect of a policy of zero interest rates (negative in the case of the deposit rate) has been positive for the revenues of the different economic players. But the impact has not been equal.

ECB niceTC1

Can the ECB go further?

Fernando Barciela | The central bank has put QE in place, a trillion euros asset purchase programme, but inflation has returned to negative territory. Has the ECB’s strategy failed? Are critics right when they say it does too little, too late.