What’s Up With Inflation?
Jeroen Blokland | Mar 18, 2019 10:22
Central banks have a pretty straightforward goal, at least on paper. They aim for price stability, which usually translates into steering the headline inflation level towards 2%. However, that has become almost impossible to achieve in practice, as traditional economic relationships seem to have broken down.
For example, Eurozone headline inflation has not kept up with the gradual rise in capacity utilization. The relationship between inflation, money supply and wage growth also show signs of weakness. Hence, central banks have expanded their policy toolkit to include other instruments, with QE being the most prominent example, but have so far still not achieved the desired result.
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