Dr. Mark Cassidy:

All I can say is report what the ECB policy is. The ECB has been given one mandate which is price stability, defined as keeping inflation at 2% over the medium term. The ECB will and has only got that mandate and if it sees risk to that price stability objective then it will act appropriately. That is the one thing on the ECB’s mind. That is over the medium term, over the two to three-year horizon. It does not refer to what the inflation rate in the current month is. It is a medium-term objective.

That is the mandate given to the ECB. It makes a lot of sense as a mandate because we may not have seen high inflation until this year. We have had an average rate of inflation of 0.5% over the past decade. In recent months, we are now seeing inflation for the first time since 2006 or 2007. It is easy to forget the dangers of high inflation but we are seeing them now. If high inflation were to persist for a number of years, we would see much worse problems. The ECB's actions are taken with the view and objective of keeping inflation contained at 2% and not allow it to get out of control. If central banks do not act, experience clearly shows that inflation rates can get out of control. Prices and wages can develop into this unfavourable dynamic with a spiral between the two, which is very damaging economically and very damaging for households and businesses. The purpose of ECB actions is to prevent inflation getting out of control over the medium term and to prevent the problems we have now becoming embedded in the economy.