Although the U.S. Federal Reserve is now thinking about tapering its monthly asset purchases in light of increasing inflation figures, European Central Bank President Christine Lagarde continues to insist that no sustained inflation risk exists.
The currently measured inflation, she says, is a temporary problem that will disappear once supply bottlenecks are overcome, so the ECB will not be changing its policies. It is like a coachman who refuses to tighten the reins when his horses are bolting, because they will eventually tire themselves out.
Never mind that, according to the Treaty of Maastricht, the ECB is obliged to ensure price stability under all circumstances. There is no provision for the possibility of letting prices run hot for a while. And, unlike the Fed, the ECB cannot legally seek to balance the goal of price stability with other monetary-policy objectives.