April 5, 2016 – Peter Praet, member of the Executive Board of the ECB, made a speech yesterday as part of the seminar series organized by SEP Senior Fellow Jean-Paul Fitoussi, in which he chronicles the ECB’s fight against low inflation. He highlights the policy position adopted by the ECB starting in 1979, which is based on the belief that “sustainable growth could not be separated from price stability, and that price stability in turn depended on a credible and committed monetary policy.” For this reason, central banks have a mandate to control inflation.
Because of the importance of price stability for macroeconomic stability and sustained economic growth, it is important for inflation to be neither too high nor too low. He argues that the current prolonged period of low inflation has increased the risks that “inflation misses might become persistent, which would be deeply damaging for the economy.” For this reason, the ECB has reacted to secure its main objective, and it will continue to do so in the future.
- The original text of Praet’s speech is available from the ECB.
- His attendance at the seminar has been covered in: