–– Repeats HICP May Not Accurately Reflect Eurozone Inflation
By Laurie Laird
LONDON (MaceNews) – The leader of the European Central Bank hinted at a reinterpretation of the Bank’s price stability mandate and raised questions over the accuracy of the Bank’s key measure of inflation.
“We have to be smart about the components that go into price stability,” said ECB President Christine Lagarde in a virtual interview broadcast by Bloomberg on Tuesday.
The ECB currently defines price stability as holding inflation at a rate of close to but below an annual rate of 2%, but the bank has largely failed to meet that target over the past decade. Eurozone inflation, as measured by the Harmonised Index of Consumer Prices, has fallen below zero over the past three months.
Lagarde queried whether the ECB should track an inflation measure “that is wider than the HCIP,” adding that “price stability encompasses a lot more than that.” Lagarde has previously questioned the accuracy of HICP, which does not include expenses related to rental accommodation. The Governing Council will discuss inflation measures “in the weeks to come,” she added.
Her comments come a day after a key ECB decision maker downplayed the prospects of the Bank following the Federal Reserve in adopting a more symmetrical inflation target. “Symmetry does not mean that we would engage in any sort of make up,” should inflation exceed the ECB’s target, said Governing Council member Yves Mersch on Monday.
President Lagarde spoke of the merits of symmetrical inflation targeting at the end of September but has not addressed the issue since then. The Governing Council intends to recalibrate its monetary policy at a rate-setting meeting next month, and the Bank’s forecasts are “being revised almost as we speak,” she added.
The president repeated her skepticism that emerging Covid vaccines would have an immediate effect on the eurozone economy, with the bloc’s biggest economies under strict lockdowns to contain the spread of a second wave of coronavirus. An effective vaccine is “not going to be a game changer” for ECB forecasts which are predicated on a “rollout” of a jab at the middle of next year, she said.
—
Contact this reporter: laurie@macenews.com.
Content may appear first or exclusively on the Mace News premium service. For real-time email delivery contact tony@macenews.com. Twitter headlines @macenewsmacro.