Inflation targeting does not work alone

„First simplify – then exaggerate“. This classical journalistic guideline was applied twice in this piece, first by myself – and then by my editors at Børsen when they wrote the headline „Central banks destroy the economy“. That’s maybe taking it a step too far. What I wanted to say in the column for Børsen is that the inflation targeting strategy does not work anymore and needs to be complemented. In fact, the ECB’s original strategy was not inflation targeting, it had a broader approach which – if it had been maintained – might have worked better than the current one which is dead set on managing inflation expectations. The competition among major central banks to have the most accommodating monetary policy has done the rest to pull us towards an unsustainable situation that needs correction. That correction will not be without pain, but that may be the topic of another piece ...

#centralbanking

#inflation