ECB's Inflation Strategy Under Scrutiny: A Balancing Act
ECB's policymaker Boris Vujcic advises against overreacting to minor inflation deviations below 2%, predicting a rebound as energy prices stabilize. Concerns coexist regarding inflation's slowdown, but ECB reviews quantitative easing's effectiveness and potential future roles in its strategy.
The European Central Bank (ECB) is advised not to overreact to euro-zone inflation temporarily slipping below its 2% target, as a rebound is anticipated. ECB policymaker Boris Vujcic highlights that minor fluctuations should not prompt major policy shifts.
The ECB recently cut interest rates for the eighth time within a year, indicating a policy pause next month despite projecting a 1.6% inflation rate for the following year. Vujcic, also Croatia's central bank governor, notes that growth in inflation is expected as energy prices stabilize, downplaying concerns over euro strength unless it sustains for several quarters.
Vujcic reflects on advice from former Federal Reserve Chair Alan Greenspan, emphasizing that low inflation is manageable if productivity compensates. The ECB is revising its strategy, revisiting quantitative easing's role amid mixed success in reviving inflation and stabilizing dysfunctional markets. Future strategies are being deliberated amidst trade tensions and economic uncertainties.
(With inputs from agencies.)
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