The ECB Maintains Its Inflation Mandate - Forex News by FX Leaders

The ECB Maintains Its Inflation Mandate

Posted Friday, September 30, 2016 by
Skerdian Meta • 2 min read

Unlike the FED or the BOJ (Bank of Japan) who abandoned their inflation mandate, the ECB still has a strong voice when it comes to inflation in the Eurozone. When I say the FED and the BOJ have abandoned their inflation mandate I don´t mean officially because inflation will always remain one of the only mandates of any central bank, if not the only, but they have already given up on their inflation goals, unlike the ECB. 

Last week the BOJ publically announced that they gave up on the 2% inflation target when they released their monthly statement. The FED followed suit this week, with its members accepting that the 2% inflation target is out of reach for the foreseeable future. They suggested that it would be better if the FED concentrated on the employment mandate only. That means accepting defeat after having put up a bitter fight for such a long time. 

The ECB on the other hand, looks like one of those large bureaucratic institutions yet, very efficient when it comes to its monetary policy. The ECB started their monetary easing programme less than two years ago and we are starting to see its effects now.

The economic growth in terms of GDP is not great but all the subcomponents and leading indicators such as consumer confidence and business sentiment are pointing up. Inflation used to be pretty low until very recently, but now that is picking up too. 

The German inflation numbers yesterday showed that the ECB is still in charge of inflation in the Eurozone, unlike the FED and the BOJ. In North Rhine, the inflation picked up by 0.7% against 0.4% expected. Brandenburg figures were expected to be negative in September but the inflation jumped by 0.4%. Apart from Hesse, the inflation figures from all other German regions beat the expectations by quite some margin. 

That´s the second victory for the ECB president Draghi, particularly against the Germans themselves who have been against the ECB QE programme even before the idea was conceived. The other victory is the positive effect we are starting to see in the economic indicators. It took some time for the QE programme to show its effect on the economy, but at least it is starting to work. I hope that the recent positive trend is sustainable.   

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies

About the author

Skerdian Meta // Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
Related Articles
The broad-based U.S. dollar is going to end this week on the bearish track as traders continue to cheer the Joe Biden administration's inaug
3 days ago
Comments
0 0 vote
Article Rating
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments