Neutral inflation. An alternative model of determining the inflation target by the ECB could be based on the concept of the so-called neutral inflation or Non-Decelerating Economic Growth Rate of Inflation (NDEGRI), understood as an average – over the period of 5-10 years – price rise which co-exists with the highest indicators of economic growth and the degree of capacity utilization (the highest indicators of economic success (ESI), at which inflationary expectations are of stable character (i.e. inflation does not tend to accelerate). Adoption of so modified a mechanism of the ECB’s inflation target determination could contribute to „releasing” of the most dynamic economies of the Eurozone and countries aspiring to join it from the specific burden which their dependence of the development rate on the ”unnaturally” and arbitrarily established inflation target may pose for them.
NDEGRI level estimates for developed countries. It is difficult to estimate the current NDEGRI level with respect to particular Eurozone member countries since in recent years both the economic growth rate and the degree of capacity utilization as well as the dynamics of inflation in these countries were determined by common monetary policy which effectively distorted natural relationships between these indicators appearing in particular economies. Preliminary comparative research conducted so far into the economies of the Euroland, United States and Japan allows to conclude indirectly that the NDEGRI level in the industrialized countries is closer to 3 rather than 2 per cent as in the 1989-2008 period American economy noted the ESI higher by ca. 37% ( 3.2 and 1.9, respectively) than those noted in the Euroland countries at average annual inflation values higher by ca. 10%. The example of Japanese economy indicates also, that low inflation does not have to be a good foundation for fast economic growth.