ECB's Rehn: Central bank should conduct a systematic review of policy strategy

Author: Justin Low | Category: Central Banks

Some critical comments from ECB governing council member, Olli Rehn

  • Unconventional tools have failed to have their desired effect
  • Interdependence of growth and inflation seem to have weakened
  • That has eroded ECB's impact on prices via demand
  • Says trust in central banks' ability to influence inflation rate may have eroded
In other words, he's saying that the central bank's toolkit is not having its intended effect of stimulating inflation in the economy. And that he's suggesting a review and dissection of why that is the case.

He's not exactly wrong as bear in mind, we live in a different world these days compared to that of the past. Just take Amazon for example. The fact that they have come in to offer retailers cheaper prices on goods and are looking to reach into other segments like fresh foods etc will only continue to put downwards pressure on prices.

Add that to global digitalisation of many processes and corporates increasingly looking to streamline their production/processes to stay competitive, it only makes sense that inflation is harder to come by these days.

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