Fed and ECB reaffirm 2% inflation goal

Any thoughts that the 2% inflation goal long sought by the US Federal Reserve and the European Central Bank (ECB) might possibly be in for a tweaking were dashed on Friday by the chiefs of the two institutions.

Gathering in Jackson Hole, Wyoming for the annual Federal Reserve Bank of Kansas City economic symposium, both Fed Chair Jerome Powell and ECB President Christine Lagarde made plain their views: There will be no change to central bankers’ shared objective of getting inflation back down to 2%.

“Two per cent is and will remain our inflation target,” Powell said in his keynote address. “We are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to that level over time.”

Inflation soared around the world as economies emerged from pandemic lockdowns and a surge in demand ran into a wall of supply chain failures and labour market constraints. After aggressive interest rate increases by the Fed and the ECB, among others, inflation has fallen but has not yet reached the 2% goal in either Europe or the US.

Read Govt sees inflation slowing down to 27%

At lunch, Lagarde was asked about the idea of “moving the goalposts” to accommodate that new reality. Like Powell, she said no. “We are playing a game; there are rules; don’t change the rules of the game halfway through.

Published in The Express Tribune, August 27^th, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.