TALLINN/HELSINKI (Reuters) - The European Central Bank should have greater flexibility around its inflation goal and could consider targeting price growth in a band, Estonian central bank chief Madis Müller said on Tuesday.
The ECB is preparing for a broad review of its monetary policy next year with a particular focus on the interpretation of its target of keeping inflation at close to but below 2%, a level it has undershot since 2013.
Some argue that economic fundamentals have changed since the ECB’s last review in 2003 and there are now persistent downward pressures on inflation, which make some of the ECB’s unprecedented stimulus efforts futile.
“One could imagine that under some circumstances we are OK with some flexibility around 2%, maybe bigger than so far,” Müller told Reuters on the sidelines of a news conference in the Estonian capital Tallinn. He added there should be a discussion about a targeted band, as suggested by other policymakers.
Müller, who also sits on the ECB’s rate-setting Governing Council said the review should consider whether the ECB’s control over inflation has diminished and how to amend policy if this was proven to be the case.
“Maybe in this case we would not need to be as aggressive with our policies. We could be more flexible and not chase that goal at any price,” Müller added.
ECB President Christine Lagarde last week said that the review, which will “turn each and every stone”, would start in January and conclude by the end of the year.
For now though, the ECB will continue to target inflation at just below 2% and will maintain its easy stance until price growth moves up, Finnish central bank chief Olli Rehn separately told a news conference in Helsinki.
Reporting by Tarmo Virki and Anne Kauranen; Writing by Balazs Koranyi; Editing by John Stonestreet and Pravin Char