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Can inflation derivatives help the ECB hit its inflation target?
The ECB could reinforce its pursuit of price stability by using inflation derivatives
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The European Central Bank (ECB) is struggling to maintain its past success in preserving price stability now that the risk is of too-low rather than too-high inflation. The ECB’s main objective is to pursue price stability, which it defines as a rate of inflation below but close to 2% in the medium term. While it achieved this objective very well in the past, indeed one could even say nearly perfectly once short- to medium-term shocks to inflation are washed out, the ECB’s grip over price
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