Against this backdrop, I support calls for a broad review of the ECB’s strategy, which should have as one of its main aims the widening of our policy scope. The challenges I have outlined in this talk warrant a discussion on the merits of increased flexibility in the face of external shocks.
One way to achieve this would be the introduction of a symmetric band around the inflation aim, which would buy the central bank time and flexibility in responding to forces it cannot control. The monetary strategy could also be made more flexible by lengthening the horizon over which it would be desirable to bring inflation back towards its aim.