Sunday , January 24 2021
Home / Project Syndicate / The ECB’s New Stealth Mandate

The ECB’s New Stealth Mandate

Summary:
Over the course of the pandemic, the European Central Bank has effectively adopted a new mandate, perhaps having concluded that its inflation target is unattainable without more fiscal stimulus. The new top priority appears to be financial solidarity within the eurozone, and it could not have come at a better time. STANFORD – The European Central Bank’s monetary policy has undergone a peculiar change during the pandemic. Something other than the goal of price stability appears to be guiding the bank’s overall approach, suggesting that it has adopted a new mandate without publicly announcing it. Who Will Succeed Merkel? Popow/ullstein bild via Getty Images

Topics:
Melvyn Krauss considers the following as important:

This could be interesting, too:

Miles Kimball writes xkcd Comics on Statistics

Timothy Taylor writes Could Environmentalists Just Buy What They Want?

Scott Sumner writes Anti-ostrich

[email protected] (Cyril Morong) writes Another Semester Has Started

Over the course of the pandemic, the European Central Bank has effectively adopted a new mandate, perhaps having concluded that its inflation target is unattainable without more fiscal stimulus. The new top priority appears to be financial solidarity within the eurozone, and it could not have come at a better time.

STANFORD – The European Central Bank’s monetary policy has undergone a peculiar change during the pandemic. Something other than the goal of price stability appears to be guiding the bank’s overall approach, suggesting that it has adopted a new mandate without publicly announcing it.

Since the start of the COVID-19 crisis, the ECB has succeeded in closing the gap between northern and southern member states’ borrowing costs, bringing eurozone North-South yield spreads to historic lows. And with Europe facing multiple threats to its unity – from Donald Trump’s administration and Vladimir Putin’s revanchist Kremlin to an increasingly assertive China and homegrown populists – policymakers have effectively adopted “spread narrowing” as a new mandate.

ECB President Christine Lagarde and her colleagues seem to recognize that ensuring European unity and solidarity is the most important objective an institution like the ECB can pursue at this critical moment. Though no one at the bank is likely to admit it, there is little question that they are now in the business of holding down spreads.

By purchasing massive quantities of periphery member-state bonds through its quantitative-easing policy and the Pandemic Emergency...

Leave a Reply

Your email address will not be published. Required fields are marked *