Lars Christensen posts on “assymetries”.
This is Jens Weidmann:
“The euro zone is recovering only gradually from the harshest economic crisis in the post-war period and there are few price risks. This justifies the low interest rate…Low price pressure however cannot be a licence for arbitrary monetary easing and we must be sure to raise rates at the right time should inflation pressure mount.”
It is the second part of the quote, which is interesting. Here Weidmann basically spells out his preferred reaction function for the ECB and what he is saying is that he bascially wants an asymmetrical monetary policy rule – when inflation drops below the ECB’s 2% inflation target the ECB should not “arbitrary” cut its key policy rate, but when inflation pressures increase he wants the ECB to act imitiately.
I don´t see that as differing much from thought widespread at the Fed:
The Fed has been missing its inflation target for much of the period much since the start of the financial crisis in mid-2007.
In November, officials’ preferred inflation measure, the personal consumption expenditures index, stood at just 0.9%, under half policy makers’ stated 2% goal. This causes some of the more dovish observers to argue the central bank treats its target as asymmetric — that is, it is more concerned about overshooting than underachieving.
HT Becky Hargrove