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A flexible inflation target is not a panacea

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A flexible inflation target is not a panacea

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Christine Lagarde, ECB president. If the central bank conducts its policy review and adopts an average target of, say, 2 per cent, it would give itself more flexibility
Christine Lagarde, ECB president. If the central bank conducts its policy review and adopts an average target of, say, 2 per cent, it would give itself more flexibility © Martin Lamberts/ECB/DPA

Right now the debate in central banks is about the shape of the recovery. If the optimists are right, central banks will soon be confronted with a much bigger issue: should they tolerate a spike in inflation rates, or take the punch bowl away early?

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