Saturday

6th Jun 2020

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

Support quality EU news

Get 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.

EU warns UK to abide by Brexit political declaration

"No significant progress" has been made on the latest round of talks between the UK and EU on how their relationship should look from January, according to Michel Barnier. The EU told UK to stick to its prior commitments.

News in Brief

  1. Poland accused of 'blatant violation' of EU court injunction
  2. EU concerned by US approach to Kosovo and Serbia
  3. City morgues cast doubt on Putin's virus data
  4. ECB increases pandemic stimulus to €1.35 trillion
  5. New EU cloud computing platform 'moonshot'
  6. City of Berlin passes anti-discrimination law
  7. Iran hits record corona cases in second wave
  8. EU job losses tell tale of pandemic damage

EU warns UK to abide by Brexit political declaration

"No significant progress" has been made on the latest round of talks between the UK and EU on how their relationship should look from January, according to Michel Barnier. The EU told UK to stick to its prior commitments.

Green Deal

CAP 'failed to halt biodiversity loss', auditors find

The European Court of Auditors has urged the European Commission to establish measurable commitments to tackle biodiversity loss caused by intensive farming - as the Common Agriculture Policy has so far failed to reverse this long-standing issue.

Stakeholders' Highlights

  1. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  2. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  3. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  4. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis
  5. UNESDACircularity works, let’s all give it a chance
  6. Nordic Council of MinistersNordic ministers call for post-corona synergies between economic recovery and green transition

Latest News

  1. EU warns UK to abide by Brexit political declaration
  2. Internal EU borders open by 15 June - bar V4, Portugal, Spain
  3. CAP 'failed to halt biodiversity loss', auditors find
  4. After Covid-19, deserted Venice struggles to survive
  5. Commission plans strategy to 'maximise' vaccine access
  6. How spies use women to steal EU secrets
  7. Hong Kong - when the Chinese Dream became a nightmare
  8. Right of reply: Letter from the Hungarian government

Join EUobserver

Support quality EU news

Join us