ECB should change inflation target, researchers to tell policymakers
FRANKFURT, June 27 (Reuters) - The ECB should abandon targeting headline inflation and focus instead on price growth in discretionary spending to protect the bloc's poorest, a paper to be presented to policymakers at the bank's preeminent research conference argued on Friday.
The ECB targets inflation at 2% and a soon-to-be-concluded review will not even discuss the definition of the target as policymakers have long argued that using a different measures, like underlying inflation, or figures incorporating housings costs, could sow confusion.
But the paper written for the ECB Forum on Central Banking in Sintra, Portugal next week argues that the current framework disproportionately hurts low income workers and leads to an inferior outcome for society.
The logic is that after an interest rate hike, discretionary spending contracts significantly more than needed, triggering a fall in labour demand in sectors producing discretionary goods and services.
"These sectors employ a larger share of low-income, hand-to-mouth workers, whose consumption is highly sensitive to income fluctuations," the paper agued.
Thus, the initial drop in discretionary spending cascades into a broader decline of overall demand, amplified by this impact on lower-income households.
"By targeting discretionary inflation, the central bank provides households with an incentive to smooth their discretionary spending; in turn, this ameliorates the negative employment effects on hand-to-mouth workers in discretionary industries," the paper argued.
Although this would lead to a more accommodative policy stance, stabilising discretionary spending inflation allows the economy to more effectively close the so-called output gap, or the difference between potential and actual output, the paper argued.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Scottish Sun
an hour ago
- Scottish Sun
Sir David Murray vows to save Dalzell steel mill as he reveals masterplan
SIR David Murray vowed to be a 'big customer' of Dalzell steel mill if his masterplan to save it becomes reality. The ex-Rangers owner and metal magnate, 73, says he is ready to play a major role in providing Scottish steel for North Sea wind turbines to power the nation's future energy. 4 Sir David Murray vowed to be a 'big customer' of Dalzell steel mill Credit: Andrew Barr 4 The plant in Motherwell is currently mothballed due to cheap Chinese steel imports and a drought in orders Credit: Getty 4 Some 140 workers were furloughed or placed on maintenance duties in April this year Credit: Reuters 4 New Liberty owner Sanjeev Gupta with Nicola Sturgeon Credit: Alan Ewing The plant in Motherwell is currently mothballed due to cheap Chinese steel imports and a drought in orders, with some 140 workers furloughed or placed on maintenance duties in April this year. Sir David has been in talks with Holyrood ministers for a decade over halting the industry's decline. He has now revealed he has held hush-hush negotiations with the UK Government to rescue the mill. His latest intervention comes after PM Sir Keir Starmer and Scottish Secretary Ian Murray blasted SNP ministers in May for allowing the nation's last remaining steel plants — Dalzell and Clydebridge in Cambuslang — to cease production. The Scottish Government orchestrated a takeover of the sites in 2016, putting taxpayers' cash on the line. And Sir Keir insisted last month it was important to 'get those plants up and running again'. Now Sir David has told The Scottish Sun on Sunday: 'There is a lot of political stuff going on over Dalzell. I've been heavily involved in trying to save the plate mill. 'I have spoken to the British Government in the last week and there's a meeting in a few weeks' time. 'The workforce has stayed at home for months and got 80 per cent of their wages. But it could be sorted in a week. We need people in management to work with me. 'I'd be the chairman, I'd help the management, I'd help the business, we'd be a big customer. Former Rangers owner Sir David Murray vows to save Dalzell steel mill with masterplan 'At the time it closed, I was one of its biggest customers. 'At our peak we'd be selling 550,000 tonnes of steel a year. 'That's five Forth rail bridges in weight. Today it's just over one because the fabrication business is diminishing — it's ridiculous that Britain does not have the capacity to roll a steel plate.' Sir David told how there is one mill in the north-east of England which is Ukrainian-owned. He went on: 'The wind turbines being made for the North Sea are much bigger now. 'It's a heavier plate, ideal for Dalzell. There are 50,000 tonnes of steel coming to Teesside this week from Korea to be made into turbines. 'The Scottish Government don't own one wind turbine. Look at the cost of energy. We are buying power from other people who put in these turbines. We need to create growth, jobs and prosperity in this country.' We told last July of fears the Dalzell operation would be mothballed amid a slowdown in work. A report in March by the Community Union, which represents workers at the two plants, said low-cost steel from China and high UK energy prices were hitting British steel production. The union said Dalzell needed investment to become a 'world-leading producer' of a key turbines component. Sir David has long called for an inquiry into the Scottish Government's involvement in the 2016 sale of the Lanarkshire plants to tycoon Sanjeev Gupta and Liberty Steel. The sale was backed by a £7million loan from Scottish Enterprise. MURRAY'S HEART SCARE OP EXCLUSIVE by Rodger Hannah SIR David Murray has lifted the lid on a secret heart op after he was diagnosed with a potentially-fatal medical condition. The businessman fell ill shortly before selling Rangers to Craig Whyte in 2011 — to be told he had an aortic aneurysm. He revealed: 'I was driving home over the Forth Road Bridge and I thought I was having a heart attack. I went into Dunfermline Hospital. I had a scan. It's basically your main blood vessel and the aneurysm makes it expand. 'If it bursts, you've got about half an hour.' Sir David believes the pressure of Rangers' financial issues and the global recession could have contributed to his health scare. He added: 'They told me I needed an operation, which I had in Edinburgh Royal Infirmary. 'I shared the information with Craig Brown a few years ago. 'He had an identical thing. His burst but they managed to get him in on time.' Former Scotland manager Brown needed life-saving surgery in 2020. He told the Scottish Sun at the time: 'They say only about three out of ten survive it.' Brown died in 2023 aged 82. But Sir David claims ministers rejected his rival bid because it was potentially incompatible with state aid rules, and has criticised Mr Gupta's management since. He said: 'Ten years ago, I met the Scottish Government and the First Minister [Nicola Sturgeon]. I put a proposal to them and I was told they couldn't do it because they couldn't give state aid. 'Then they lent somebody else £7million who hasn't paid it back.' Mr Gupta, executive chairman of GFG Alliance which owns Liberty Steel, is being prosecuted by Companies House for failing to file accounts for more than 70 companies listed in Britain. He denies any wrongdoing. Ayr-born Sir David spoke exclusively ahead of this Thursday's July publication of his autobiography 'Mettle: Tragedy, Courage and Titles. He remains chair of his family firm, Murray Capital Group, albeit his son, also David, runs day-to-day operations as managing director. He reveals in his new book that some of his teenage grandkids have already attended board meetings. He added: 'There is an opportunity for young people but you better come to the table with a skill. 'You're not coming, as my great friend Sean Connery said, as a member of The Lucky Sperm Club.' The UK Government confirmed Sir David had met with MP Ian Murray. A source said: 'David Murray has met Ian Murray to discuss his concerns about the Dalzell works being mothballed because the SNP cut a bad deal. We encourage the SNP Government to take advantage of the trade deals the UK Labour Government has cut and the industrial strategy which present a huge opportunity for Scottish steel.' Liberty Steel declined to comment. The Scottish Government said its 2016 intervention 'sustained over 100 jobs at Dalzell and retained steelmaking capacity in Scotland.' Scottish Enterprise confirmed: 'We remain in discussion with Liberty Steel regarding repayment of the loan funding.'
The Independent
3 hours ago
- The Independent
Thousands protest Bulgaria's euro adoption and call for a referendum
Days before Bulgaria was expected to become the 21st member of the eurozone, opponents of the move geared up Saturday for a final battle to change the schedule. Thousands of protesters gathered on a central square in downtown Sofia to protest government plans to adopt the euro and to demand a referendum on the new currency. The European Union has given the green light for Bulgaria to adopt the euro starting Jan. 1. The protesters, led by civic groups, nationalist and pro-Russian parties known for their opposition to the euro, declared that after the rally they intended to set up a tent camp on the central square, dubbed 'Town of the lev,' after the name of the national currency. On a platform for speakers hung a huge banner that read 'The battle for the Bulgarian lev is the last battle for Bulgaria.' The leader of the pro-Russian Vazrazhdane party Kostadin Kostadinov told the protesters that the country will be stripped of its currency. 'Someone else will decide how we spend our money, the Bulgarian budget will be approved by the European Central Bank," he said. 'This is an anti-state coup, this is treason.' Kostadinov announced that lawmakers from Germany, Lithuania, Romania, the Czech Republic, Slovakia and Hungary have joined the event to support the protest. Ahead of the demonstration, Vazrazhdane submitted in Parliament a motion for a vote of no confidence in the current government, accusing it of failing to undertake necessary reforms to restore stability to public finances and working for the forceful adoption of the euro. Parliament will vote on the motion next week, but the pro-EU government coalition is expected to survive. The Balkan country joined the European Union in 2007 and is now on the final stretch of its accession to the eurozone. The last institutional hurdle is the approval from both the European Parliament in Strasbourg and the Economic and Financial Affairs Council in Brussels, scheduled for July 8. These steps come after the European Council gave its clear endorsement of Bulgaria joining the eurozone on Jan. 1, 2026. During its almost two decades-long EU membership, Bulgaria has been plagued by political instability and corruption that have fueled euroscepticism among its 6.4 million citizens. Now, scores of false claims by opponents of the eurozone have been published on social networks feeding fears of economic changes that they say could bring more poverty. Economists say joining the euro will not bring massive change to Bulgaria's economy in the short run. That's because the government has pegged the currency to the euro by law, at a fixed rate of 1 lev for every 51 eurocents.
Times
4 hours ago
- Times
Irish bookie BoyleSports takes £100m punt on UK high streets
Ireland's biggest independent bookmaker has placed a £100 million bet on Britain's struggling high streets, with plans to open hundreds of new shops. The family-owned BoyleSports, a staple on high streets in Ireland, wants to open 200 new shops and create 1,000 jobs in what its bosses say is the UK's under-appreciated market. The move comes as BoyleSports is expected to be controversially unveiled as the new front-of-shirt sponsor at the Premier League football club West Ham United. BoyleSports, which operates 390 shops across Ireland and the UK, was founded by John Boyle in 1982, who remains on the company's board as chairman. Some 70 outlets are in the UK at present. The UK expansion will be funded by its shareholders, Vlad Kaltenieks, the company's chief executive, said. The move may be viewed as counterintuitive given the retreat from the high street by the likes of William Hill, Coral and Ladbrokes in recent years as they concentrate on online gambling operations. The number of betting shops has fallen every year for the past ten years, according to the Gambling Commission, although numbers dropped by only 1.4 per cent last year. The pandemic had a profound impact: some 1,808 shops have closed since Covid-19 hit, the equivalent of one in five of the number of shops pre-lockdown. UK bookmakers have instead turned their attention to US online markets, where sports betting is being legalised on a state-by-state basis. With America expected to be the world's biggest regulated market, UK betting companies have used their online expertise to partner with American firms. Kaltenieks said that this had resulted in UK betting shops becoming an under-appreciated market. Like other firms operating in the UK, BoyleSports was fined £2.8 million by the Gambling Commission in 2020 for failing to comply with money-laundering risk assessments. Kaltenieks said that it complies with all legal requirements, and that compliance was one of the firm's priorities. It is precisely because the UK is heavily regulated that makes the new investment attractive, he added. 'The UK is one of the most exciting, well-regulated and competitive betting landscapes in the world, and we believe we offer something genuinely different to customers,' he said. 'As a family-owned, independent business, we've built a loyal customer base in Ireland by focusing on trust, service and a seamless experience and now we're rolling that approach out even more widely across the UK.' There has been speculation over a potential tie-up with West Ham United over the past few weeks. The company declined to comment on such a deal, though it is understood that the club could unveil the new sponsorship deal as early as this week. Premier League teams have agreed to withdraw gambling sponsorship from the front of their matchday shirts by the end of the upcoming 2025-26 season following a campaign by gambling industry critics.
