It is time for the ECB to reevaluate its policies

The ECB is not doing its job. Maybe if it read its own website it would realize that. 

The objectives of the ECB as stated on its own website are:

"The primary objective of the ESCB shall be to maintain price stability".And: "without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community as laid down in Article 2." (Treaty article 105.1)

The objectives of the Union (Article 2 of the Treaty on European Union) are a high level of employment and sustainable and non-inflationary growth.

Of course, as we all now, the primary objective of the ECB is to maintain price stability. But a secondary goal is to "high level of employment". So the objective is actually something akin to the FEDs dual mandate but the ECB seems to be focused on the first objective above all else.

This brings us to what is price stability? Thankfully the ECB also provides us with a definition:

Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%

It is worth noting that it is the ECB that set this definition, and it is therefore also possible for the ECB to change this definition. Thankfully the ECB also tells us why they arrived at 2 %:

• provide an adequate margin to avoid the risks of deflation. Having such a safety margin against deflation is important because nominal interest rates cannot fall below zero. In a deflationary environment monetary policy may thus not be able to sufficiently stimulate aggregate demand by using its interest rate instrument. This makes it more difficult for monetary policy to fight deflation than to fight inflation.
• take into account the possibility of HICP inflation slightly overstating true inflation as a result of a small but positive bias in the measurement of price level changes using the HICP.
• provide a sufficient margin to address the implications of inflation differentials in the euro area. It avoids that individual countries in the euro area have to structurally live with too low inflation rates or even deflation.

 Lets take this in order:

1: The ECB wants to avoid a situation where inflation is so low that they have to use other monetary instruments than the interest rate. Of course we are now in this exact situation they wanted to avoid. On this point the 2 % objective is a clear failure.

2: They are actually targeting a real life inflation rate that is lower than 2 %, which only makes 1 and 3 even worse.

3: The ECB don't want deflation anywhere in the Eurozone, but at the moment the BRIICS are all under immense deflationary pressure. Again the 2 % objective is a clear failure.

I realize that you don't want to change these targets everyday, and a crisis is probably the worst time to do it, but we are on the brink of disaster and something's gotta give.

Surely this sentence is crazy

From the latest ECB monthly bulletin comes this absurdity:

"Risks to the medium-term outlook for price developments continue to be seen as broadly balanced. On the upside, the main risks relate to the possibility of increases in indirect taxes and administrative prices, owing to the need for fi scal consolidation in the coming years. The main downside risks relate to the impact of weaker than expected growth in the euro area and globally."

Surely that is crazy!

Lets try to parse it.

Risks to the medium-term outlook for price developments continue to be seen as broadly balanced. 

Inflation is expected to be around 2 % in the medium-term.

On the upside, the main risks relate to the possibility of increases in indirect taxes and administrative prices, owing to the need for fiscal consolidation in the coming years.

But it might be higher because low NGDP growth leads to high public sector deficits, and to counter that governments will have to raise indirect taxes. 

The main downside risks relate to the impact of weaker than expected growth in the euro area and globally."

And it might be higher because the Eurozone has low NGDP growth.

So according to the ECB the reason for both high and low inflation is low NGDP growth. Surely the right policy response from the ECB is to at least lower interest rates to create higher NGDP growth. But it doesn't look like that's gonna happen. I guess that's what's really crazy!