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Christine Lagarde and Jerome Powell greeting each other during a meeting of finance ministers and central bankers at the G20 summit in Buenos Aires in July 2018.

The Fed and ECB: Average inflation targeting for two

  • Instead of protecting price stability and financial solidity, the Fed and the ECB are focused on protecting the solvency of indebted governments
  • The banks’ policies of artificially cheap credit also rescue the balance sheets of ailing private companies
  • The central banks’ latest policy twist, “average inflation targeting,” means that higher inflation will be tolerated for undefined periods
  • A combination of high inflation and low interest rates would shrink debts and ensure servicing them remains cheap
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Professor Enrico Colombatto
Further distortions may need to occur before some backtracking is considered
read more about it in the report
What's inside
  • Instead of protecting price stability and financial solidity, the Fed and the ECB are focused on protecting the solvency of indebted governments
  • The banks’ policies of artificially cheap credit also rescue the balance sheets of ailing private companies
  • The central banks’ latest policy twist, “average inflation targeting,” means that higher inflation will be tolerated for undefined periods
  • A combination of high inflation and low interest rates would shrink debts and ensure servicing them remains cheap
Who will benefit?
  • Business leaders and policy makers sensitive to price stability and availability of ...
  • Academic and researchers in central banking
  • Risk-management and other financial industry professionals
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