The Netherlands and Austria have challenged the European Central Bank’s bond-buying program on Wednesday, demanding a radical rethink under incoming President Christine Lagarde.
Austrian Central Bank President, Robert Holzmann, and the Netherlands, Klaas Knot, questioned the standard inflation target of just under 2%, which is also adhered to by the US Federal Reserve, the Bank of England, the Bank of Japan, and most OECD economies.
“I am fundamentally questioning the paradigm”, Holzmann told Handelsblatt. In a speech delivered in New York, Knot said the ECB should look beyond inflation when setting policy.
Mario Draghi’s eight-year term has been defined by the €2.6 trillion bond-buying program. This has always been questioned by Germany and the Netherlands, but the renewal of the program is now called into question by France.
The Governor of the Bank of France, Villeroy de Galhau, said on Wednesday that the ECB needs to clarify the “symmetric nature” of its 2% inflation target as part of its upcoming policy review, echoing Knot’s view.