The problem of stagflation. How should the ECB respond to the increase in inflation?
Inflation began to increase rapidly towards the end of 2021 and remained elevated throughout 2022. Higher energy prices contributed significantly to the increase in inflation. However, core-inflation, excluding the direct contribution of energy prices, was also significantly above the European Central Bank’s inflation target. Partially due to the highly expansionary monetary policy during the pandInflation began to increase rapidly all around the world towards the end of 2021, and it remained elevated throughout 2022. Higher energy prices contributed significantly to the increase in inflation. However, core inflation, excluding the direct contribution of energy prices, was also significantly above the European Central Bank’s inflation target, which was partially due to the highly expansion
