Friday

29th Mar 2024

Stiglitz: ECB should scrap inflation targets

The European Central Bank (ECB) should scrap its target to keep price inflation at 2 percent, Nobel prize winning economist Joseph Stiglitz said on Thursday (6 March).

Speaking at an event organised by the European Parliament's Socialist group, Stiglitz said central banks should look to strike a balance between controlling inflation and supporting job creation.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • The ECB should scrap its inflation target and focus on measures to stimulate jobs - Stiglitz (Photo: World Economic Forum)

"The ECB's mandate needs to be changed," he noted.

Stiglitz is a long-standing critic of inflation-targeting by central banks, believing instead that monetary policy should be used to stimulate employment.

Stiglitz's remarks came as ECB president Mario Draghi kept the bank's headline rates, including its main interest rate, at the record low of 0.25 percent, following a meeting of the bank's governing council the same day.

Draghi said the bank decided to leave the rate unchanged because of continued signs the eurozone economy is slowly recovering.

"We saw our baseline by and large confirmed. There is a continuation of a modest recovery," he told reporters in Frankfurt.

Draghi has consistently rejected suggestions that Europe's low inflation and stagnant economy could see a repeat of Japan's economic experience, which saw companies and households hold off on spending on expectations of lower prices ahead, leading to two decades of economic stagnation.

New forecasts published by ECB staff estimate that inflation will stay at 1.0 percent this year, 1.3 percent in 2015, and 1.5 percent in 2016 - comfortably below its 2 percent target all the way through the projection.

Last month, the bloc's economic affairs commissioner, Olli Rehn, warned that low inflation is making price cuts in the peripheral economies less effective at boosting their competitiveness, making it harder to geographically rebalance the economy.

However, the ECB's main mandate under the EU treaty is tightly restricted to the maintenance of 'price stability' across the eurozone at a rate of around 2 percent per year.

Euro area sees record low inflation

One year after oil and food price crisis, the euro area has showed the opposite record of extra low inflation due to the overall economic downturn.

German bank breaks anti-inflation taboo

In a marked shift from its age-old taboo of accepting higher inflation, the German Bundesbank has said it may tolerate a devaluation of the common currency to help out crisis-hit countries.

Record high inflation sparks debate about interest rates

Consumer prices in the eurozone countries climbed to four percent in June, reaching twice the rate of the European Central Bank's inflation goal. The surge has instantly sparked off a debate about whether the Frankfurt-based bank should increase interest rates.

ECB considers printing more money

The European Central Bank over the next months will consider various options of 'quantitative easing' - also known as money printing - to counter the risk of deflation.

Opinion

EU Modernisation Fund: an open door for fossil gas in Romania

Among the largest sources of financing for energy transition of central and eastern European countries, the €60bn Modernisation Fund remains far from the public eye. And perhaps that's one reason it is often used for financing fossil gas projects.

Latest News

  1. Kenyan traders react angrily to proposed EU clothes ban
  2. Lawyer suing Frontex takes aim at 'antagonistic' judges
  3. Orban's Fidesz faces low-polling jitters ahead of EU election
  4. German bank freezes account of Jewish peace group
  5. EU Modernisation Fund: an open door for fossil gas in Romania
  6. 'Swiftly dial back' interest rates, ECB told
  7. Moscow's terror attack, security and Gaza
  8. Why UK-EU defence and security deal may be difficult

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us