Can inflation derivatives help the ECB hit its inflation target?
The ECB could reinforce its pursuit of price stability by using inflation derivatives
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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