The ECB’s mandate is clear: to ensure price stability in the Eurozone. Economists at Commerzbank do not believe that the ECB’s current interest rate is sufficient to push inflation down.
ECB strategy with pitfalls
Fighting inflation without stifling the economy. The ECB is pursuing this goal with a strategy of not raising interest rates too much, but keeping them at this level for a longer period of time (‘lower high for longer’).
However, in doing so, it risks inflation settling at a higher level. This would leave the central bankers with no room for manoeuvre for significant rate cuts for years to come and the economy would have to drive with the handbrake on.
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