TheGrinder on Nostr: Newsflash: The EUR will return to 2% inflation on the mid-term and in a timely manner ...
Newsflash: The EUR will return to 2% inflation on the mid-term and in a timely manner since 2020. TLDR: The ECB has never operated within a 2% inflation target and they never will.
The European Central Bank (ECB) has consistently emphasized its commitment to bringing inflation back to its 2% target over the medium term in a "timely manner." This rhetoric can be traced back to the period following the initial economic disruptions of 2020.
2020-2021: During this period, the ECB maintained an accommodative monetary policy, with a focus on addressing the pandemic-induced downturn. Statements from 2021 indicate that the ECB was already framing its strategy around medium-term inflation expectations, stressing flexibility and responsiveness to economic conditions.
2022: As inflation surged following supply chain disruptions and the energy crisis exacerbated by geopolitical tensions, the ECB shifted toward a policy of normalization. Throughout the year, it emphasized that interest rate hikes and other measures were aimed at steering inflation back to the 2% medium-term target, highlighting a determination to act in a timely and appropriate manner.
2023 to Present: The ECB's communication has remained consistent in reaffirming its goal of achieving price stability. As inflation pressures persisted, the Governing Council has repeatedly used the language of "returning to the 2% medium-term target in a timely manner," underscoring a commitment to adjust monetary policy as necessary based on data-driven assessments. This has been a recurring theme in press conferences and monetary policy statements, including recent updates from 2023.
BUT THERE IS MORE
Over the last 25 years (since the euro's introduction in 1999), the euro area inflation rate has rarely aligned with the European Central Bank's target of 2% annual inflation. Based on historical data:
Sustained Periods at 2%:
From approximately 2003 to 2007, inflation hovered around 2%, occasionally dipping slightly above or below. This period represents one of the most stable matches with the ECB's target.
Deviations:
Inflation often exceeded 2% during spikes, such as during the 2008 financial crisis, the 2011 sovereign debt crisis, and the recent post-pandemic inflation surge. Between 2013 and 2016, inflation fell significantly below 2%, even turning negative at times due to weak demand and deflationary pressures.
Post-COVID-19, inflation escalated dramatically, driven by supply chain disruptions and energy price shocks, reaching historic highs of over 10% in 2022. Current inflation rates remain elevated but have started to decline in 2024, nearing 2% again in some months.
In summary, true alignment with 2% inflation has occurred only intermittently and primarily during the mid-2000s. Both deflationary and inflationary pressures have historically pulled the euro area away from this benchmark.
The European Central Bank (ECB) has consistently emphasized its commitment to bringing inflation back to its 2% target over the medium term in a "timely manner." This rhetoric can be traced back to the period following the initial economic disruptions of 2020.
2020-2021: During this period, the ECB maintained an accommodative monetary policy, with a focus on addressing the pandemic-induced downturn. Statements from 2021 indicate that the ECB was already framing its strategy around medium-term inflation expectations, stressing flexibility and responsiveness to economic conditions.
2022: As inflation surged following supply chain disruptions and the energy crisis exacerbated by geopolitical tensions, the ECB shifted toward a policy of normalization. Throughout the year, it emphasized that interest rate hikes and other measures were aimed at steering inflation back to the 2% medium-term target, highlighting a determination to act in a timely and appropriate manner.
2023 to Present: The ECB's communication has remained consistent in reaffirming its goal of achieving price stability. As inflation pressures persisted, the Governing Council has repeatedly used the language of "returning to the 2% medium-term target in a timely manner," underscoring a commitment to adjust monetary policy as necessary based on data-driven assessments. This has been a recurring theme in press conferences and monetary policy statements, including recent updates from 2023.
BUT THERE IS MORE
Over the last 25 years (since the euro's introduction in 1999), the euro area inflation rate has rarely aligned with the European Central Bank's target of 2% annual inflation. Based on historical data:
Sustained Periods at 2%:
From approximately 2003 to 2007, inflation hovered around 2%, occasionally dipping slightly above or below. This period represents one of the most stable matches with the ECB's target.
Deviations:
Inflation often exceeded 2% during spikes, such as during the 2008 financial crisis, the 2011 sovereign debt crisis, and the recent post-pandemic inflation surge. Between 2013 and 2016, inflation fell significantly below 2%, even turning negative at times due to weak demand and deflationary pressures.
Post-COVID-19, inflation escalated dramatically, driven by supply chain disruptions and energy price shocks, reaching historic highs of over 10% in 2022. Current inflation rates remain elevated but have started to decline in 2024, nearing 2% again in some months.
In summary, true alignment with 2% inflation has occurred only intermittently and primarily during the mid-2000s. Both deflationary and inflationary pressures have historically pulled the euro area away from this benchmark.