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