Low Interest Rate Policy of the European Central Bank (ECB). Introductory Thoughts on the Current Situation

Abstract

As the lack of sufficient information for the calculation of the price index is generally known, the ECB no longer sets the objective of achieving the statistical annual rate of zero per cent of price increase but aims for an annual increase of slightly less than two per cent. The task of the ECB is symmetrical by nature – both too high and too low inflation rates should be avoided. In reality, the rate of appreciation has remained considerably below the desired level for several months in the European Economic and Monetary Union and this development is continuing. The same also applies to the base inflation rate, i.e. without taking into consideration developments in energy and food prices. The reasons are besides the continuing stagnation of labour productivity also the decline in economic activity since 2009 and the related decrease in demand – particularly in the euro zone countries affected by crisis – adjustment of excessively high prices in certain countries and the continuing decline in oil prices and cheaper energy imports. The decreasing distance to the zero level at which – generally speaking – the so-called disinflation becomes deflation, is stirring up the sometimes very controversial discussions on urgently necessary investments that the ECB should make and on its role as the guardian of the currency.