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No appetite at Fed, ECB for changing inflation goal
  + stars: | 2023-08-25 | by ( ) www.reuters.com   time to read: +2 min
European Central Bank (ECB) President Christine Lagarde speaks to the media following the Governing Council's monetary policy meeting at the ECB headquarters in Frankfurt, Germany, July 27, 2023. "Two percent is and will remain our inflation target," Powell said in his keynote address. After aggressive interest rate increases by the Fed and the ECB, among others, inflation has fallen but has not yet reached the 2% goal in either Europe or the United States. Increasing the target could undermine efforts to anchor inflation expectations, she said, and anchored expectations are key to keeping inflation constrained. Reporting by Ann Saphir, Howard Schneider and Balazs Koryani; Editing by Andrea RicciOur Standards: The Thomson Reuters Trust Principles.
Persons: Christine Lagarde, Kai Pfaffenbach, JACKSON, Jerome Powell, Powell, Lagarde, Ann Saphir, Howard Schneider, Balazs Koryani, Andrea Ricci Organizations: European Central Bank, ECB, REUTERS, U.S . Federal Reserve, Federal Reserve Bank of Kansas, Fed, Thomson Locations: Frankfurt, Germany, , Wyoming, Jackson Hole , Wyoming, Federal Reserve Bank of Kansas City, Europe, United States
In both the United States and Europe, the words of central bankers led investors to cut their estimates of the peak or "terminal" rate expected in the current tightening cycle. With financial conditions loosening despite rising policy rates, "central banks must...be resolute in their fight against inflation and ensure policy remains appropriately tight long enough to durably bring inflation back to target," Adrian and others wrote. The European Central Bank seems furthest from a likely stopping point. Combined, the statements mark the start of the endgame for central banks that were slow to recognize the onset of inflation last year before engaging in a record-setting round of rate increases. Central bankers long ago stopped using the word "transitory" in reference to inflation that proved faster and more persistent than any expected.
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