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MNI BRIEF: EZ Inflation Target Too High, NCB Economists Claim

FRANKFURT (MNI)

The European Central Bank should target a euro area average inflation rate of 1.5%, according to a paper by economists from the Bank of France, the Bank of Italy and Germany's Bundesbank, with optimal targets for France and Germany at 1.8% -- compared with the current average target of "close to, but below 2%" -- and just 0.8% for Italy.

"Targeting 1.9% (the current ECB objective) in Italy costs 3.5 EUR per year per person in Italy," co-author Prof. Klaus Adam of the University of Mannheim wrote on Twitter. "Looks small but still amounts to >200m EUR per year in the aggregate."

The ECB is considering raising its price stability objective to a symmetrical 2% target as part of the monetary policy strategy review due to report in September.

MNI London Bureau | +44 20 3983 7894 | luke.heighton@marketnews.com
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MNI London Bureau | +44 20 3983 7894 | luke.heighton@marketnews.com
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