The speed and ways in which the European Central Bank is changing its stance on the nature of inflation we see are a clear indication of how eurozone central bankers are not fully prepared for inflation. Worse still, once they observe this increase, they do not realize its lasting nature and remain firm in the belief that the current rise in inflation is only a temporary phenomenon.
As the data now unequivocally disprove this belief, the Frankfurt policymaker began a race to withdraw.
The U-turn by chief economist Philip Lane is sensational in this sense. In fact, citing the upward revision in investor, analyst and consumer expectations, Lane said last week that he expects “eurozone inflation to be around 2%.”
Instead, when the Irish economist stated that inflation would fall below the 2% target and remain there in the medium term, this statement was in stark contrast to the statement raised by Lane himself three weeks ago. At the last meeting of the Governing Council, Christine Lagarde, President of the ECB, stated that the sudden and radical relocation following the relocation had shocked markets, confirming that inflation was “based”. Up “.
Olivier Blanchard has also been added to the list of economists who have recently changed their view of the permanent nature of inflation.
It is regarded as one of the most influential Keynesian economists in the world and the author of the famous theory of the “secular stagnation”, which, in short, states that the lack of growth in the face of inflation is a new norm destined to survive. For the next few decades.
Well, Blanchard himself was interviewed in the next few days New York Times He spoke in support of the US Alliance for Democracy, but said that maintaining some independence was not the answer. Expected.
It is certainly good news that many leading bankers and economists have given up faith in the tentative nature of inflation, however, this does not detract from the loss of the reputation that central banks are experiencing. For a long time, in fact, especially in times of epidemics, the patriarchal qualities of monetary policy for the economy have been emerging, giving them a role and burden that should not be inherent and should not exist.
The lack of growth and the lack of inflation will be a theory that will persist for decades to come
Central bankers are not politicians and their actions do not have to attract public opinion. Traditionally, they play the role of “bad cop” in policy making, making uncomfortable but necessary choices. Just like raising interest rates immediately to prevent excessive inflation from damaging the economy. Here, at this historical juncture, the global economy probably needs a few more uncomfortable bankers who know how to make decisions against the tide.
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