Draghi Says ECB Won't Accept Defeat on Inflation

The transcript discusses the implications of adjusting inflation expectations and targets. It highlights the credibility issues of raising inflation when targets are unmet and debates the suggestion to lower inflation targets. The impact of real interest rates on the economy is explained, emphasizing that lowering expected inflation raises real rates, leading to negative economic effects. The transcript concludes by affirming the link between inflation, expectations, and the economy.

What is a potential issue with trying to raise inflation when targets are not met?

• It will automatically succeed.

• It may lack credibility.

• It can lead to deflation.

• It has no impact on expectations.

Why might lowering the inflation target be problematic?

• It decreases nominal interest rates.

• It increases real interest rates.

• It has no effect on the economy.

• It leads to higher inflation.

What happens to real interest rates if expected inflation is lowered?

• They become negative.

• They increase.

• They remain unchanged.

• They decrease.

What is a reason for not changing inflation targets despite difficulties?

• Inflation targets are irrelevant.

• It is easy to change targets.

• There is no link between inflation and the economy.

• Changing targets can undermine credibility.

What does research show about the relationship between inflation and the economy?

• There is a link between inflation, expectations, and the economy.

• Inflation expectations are unrelated to the economy.

• There is no relationship.

• Inflation only affects the stock market.