Raising inflation target now could damage ECB credibility: Mersch

October 12, 2016 4:27 PM EDT

The headquarters of the European Central Bank (ECB) are pictured in Frankfurt, Germany, September 8, 2016. REUTERS/Ralph Orlowski/File Photo


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FRANKFURT (Reuters) - Raising a central bank's inflation target to boost inflation expectations and thus get prices moving higher is a risky, unproven idea could damage credibility, European Central Bank board member Yves Mersch said on Wednesday.

"I am not sure that this idea is entirely convincing," Mersch told a lecture at Harvard University, according to a text of his speech published by the ECB.

"At a time when inflation is low everywhere, and when central banks are running very accommodative monetary policies just to achieve that, one can question whether such signals would really be credible."

The Bank of Japan last month eased policy further and said it was now aiming to overshoot an already ambitious 2 percent inflation target, a policy shift that many said was a de facto increase in the bank's inflation target.

"I see a risk, in fact, that changing our strategy to rely on fuzzy concepts and unobservables would only end up damaging our credibility," he said about the idea of raising the target.

(Reporting by Balazs Koranyi; Editing by Robin Pomeroy)



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