There is no interest in the Fed and ECB changing the inflation target

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There is no interest in the Fed and ECB changing the inflation target

JACKSON HOLE, US, Aug 25 (Reuters) – Any notions that the US Federal Reserve and European Central Bank would tighten their long-held 2% inflation target were dismissed on Friday by the heads of the two institutions .

At their meeting in Jackson Hole, Wyoming, for the Federal Reserve Bank of Kansas City’s annual symposium, both Fed Chair Jerome Powell and ECB President Christine Lagarde made their views clear: The common goal of central banks to bring inflation back down is becoming increasingly important nothing change to 2%.

“2% is and will always be our inflation target,” Powell said in his keynote address.

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“We aim to achieve and maintain a monetary policy stance that is tight enough to bring inflation down to this level over time.”

Inflation soared around the world as economies emerged from pandemic lockdowns and a surge in demand met a wall of supply chain disruptions and labor market restraints.

Following aggressive rate hikes by the Federal Reserve and the ECB, among others, inflation has fallen but has failed to reach the 2% target in both Europe and the United States.

Over lunch, Lagarde was asked about the idea of ​​”shifting the goals” to adapt to this new reality. Like Powell, she said no.

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“We are in a game; there are rules; don’t half change the rules of the game; I’m not saying we’re halfway there, probably a little more,” Lagarde said. Raising the target could undermine efforts to anchor inflation expectations, he said, and this factor is crucial to keeping inflation under control.

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