ECB’s Makhlouf: Rate Cut Not Best Tool To Use In Current Circumstances

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tweet at 4:31am: ECB’s Rehn: Economic Rebound Weaker Than Expected - Shape Of Recovery Looks Like 'Truncated Square Root' - Inflation Risks Are On The DownsideECB could live with some inflation overshoot to help employment - Olli Rehn The European Central Bank should follow the U.S. Federal Reserve in putting more emphasis on welfare when it’s setting policy, even if that would mean inflation exceeded its target temporarily, ECB Governing Council member Olli Rehn said. The Fed said recently it would let the jobs market run hotter in the future to help lower-income families, an unusual foray into social policy that has historically been off-limits to central banks. But Rehn argued that the new economic realities guiding the Fed also applied to Europe. Low unemployment no longer comes at the cost of rapid inflation, so central banks can afford to boost social inclusion. “If this is the case, from the point of view of economic and social welfare, it makes sense to accept a certain period of overshooting while taking into account the history of undershooting,” Rehn, Finland’s central bank governor, said in an interview. Rehn is among the first European policymakers to publicly discuss the social impact of policies, especially on low-income workers. His comments suggest a departure from the narrower interpretation of the ECB’s inflation-fighting mandate.

In August 2020, COVID-19 continued to have a significant impact on international trade in goods. The first estimate for euro area exports of goods to the rest of the world in ...