In an analysis published on Wednesday 12 June by the Bruegel think tank, non-resident researcher Lucrezia Reichlin and director Jeromin Zettelmeyer consider that the European Central Bank (ECB) is facing three major challenges.
Firstly, to conduct monetary policy in a tighter budgetary context. Secondly, to conduct monetary policy in the face of a persistent risk of fragmentation of the euro area. And finally, to adapt its monetary strategy to an environment marked by inflation volatility, driven by supply shocks, but also by structural changes in the economy, on the supply side.
The authors offer avenues for strategic adjustments, including the establishment of a framework for more flexible inflation targeting, where the time horizon for achieving the price stability objective would take better account of the impact on secondary objectives (growth, employment, environment, etc. - editor’s note).
In view of structural developments and economic shocks, they also suggest revising the numerical inflation target on a regular basis, according to a pre-established timetable.
Finally, the authors believe that better coordination between tax authorities and/or a larger European budget would be useful.
Further information: https://aeur.eu/f/cn3 (Original version in French by Émilie Vanderhulst)