If you can't hit the inflation target, lower it

Author: Adam Button | Category: Central Banks

Comments from the ECB's Holzmann in an interview:

  • ECB should lower inflation target in policy review
  • Says he would support 1.5% target, or even lower
  • Pension funds and insurers can't adjust to negative rates; in the long run they are not sustainable
He said the same thing earlier this week. There's nothing magical about 2% but the argument is that it gives you a sufficient buffer before deflation kicks in. The problem is that you don't want to be lowering it at a time when you've missed the mark forever; it looks desperate.

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