inflation targeting

European Central Bank: inflation tolerance and the last mile

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European Central Bank: inflation tolerance and the last mile

Inflation in the euro area has declined from high levels in recent years, with a rate expected to be 2.3% in 2024 compared to 8.4% in 2022 and 5.6% in 2023. The European Central Bank (ECB) is discussing the concept of inflation tolerance as a way to navigate uncertainty and provide guidance on when action will be taken based on inflation levels. The ECB may consider setting an inflation range within which no action is needed, with action required as inflation approaches 3%. This approach aims to balance the need for a precise inflation target with the reality of uncertainty in the economic system.

Swiss central bank cuts rates in surprise move, getting ahead of global peers

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Swiss central bank cuts rates in surprise move, getting ahead of global peers

The Swiss National Bank cut its main interest rate by 25 basis points to 1.50 per cent and also reduced its interest rate on sight deposits to the same percentage. This decision marked the first rate cut in nine years and was unexpected by many, leading to a decrease in the value of the Swiss franc and a drop in Swiss government bond yields. The move was in response to a drop in Swiss inflation to 1.2 per cent in February, maintaining within the SNB’s target range of 0-2 per cent for nine consecutive months. The SNB’s action reflects its assessment that the fight against inflation over the past two and a half years has been effective, with expectations that inflation will remain within the target range in the coming years. This decision came before the chairman, Thomas Jordan, is set to step down in September.