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ECB should ignore latest central bank inflation fad

As dedicated followers of fashion, European central bankers have also been following the intellectual trends set by others. When inflation targeting was in vogue in the 1990s, the European Central Bank adopted the new regime and became a paid-up subscriber to the economic theory that lay behind it. 

Inflation targeting turned out to be a stunning success, for about a decade. That ended at about the time a series of crises descended on Europe. 

The last time the core rate of inflation in the eurozone was above 2 per cent was in 2008.

Wolfgang Münchau FT 5 September 2020

The troubling bit is that these forecasts reveal a basic lack of understanding of the underlying inflation process.


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