Through the use of monetary policy, Europe successfully establishes an inflation target.

Analysis

The European Central Bank (ECB), established in 1999, set an inflation target of “below, but close to 2%.” To achieve this goal, the ECB implemented a range of monetary policy measures, including interest rate adjustments and quantitative easing. The ECB’s policy has been successful in maintaining inflation within the target range, with the inflation rate averaging around 1.5% between 2000 and 2020.

Evaluation

Pros

well, it worked.

• Reversible
• Quick
• Central bank independence

Cons

• Supply shock of COVID 19.
• Supply side problems can’t be addressed