Thanks, Ben!

Our research highlights how a macroeconomic model—the NKPC—becomes a "storytelling device" to present a political choice as a technical necessity. Critical questions remain about the ECB’s self-representation as a neutral player. Read the full article: doi.org/10.1080/1356...

ECB Executives argued that dampening demand was needed not only to cool off labour markets but also to force firms to absorb higher wage costs into lower profit margins, leading to "profit-led disinflation." Monetary tightening was presented as distributionally neutral, even as real wages fell.

After initially blaming "transitory" external factors, their narrative shifted to the risk of second-round effects and "tit-for-tat" inflation: they increasingly stressed the role of overly tight labour markets while also acknowledging the role of profits.

Our study is based on a qualitative content analysis of 128 speeches by ECB Executive Board members from 2021-2024. We track how they discussed inflation drivers (wages vs. profits) and justified rate hikes over time.

We identify 2 discursive strategies:

1. NECESSITATION: Framing tightening as essential to anchor inflation expectations and fix demand-supply imbalances

2. DIFFUSION: Masking the anti-labour bias by arguing that rate hikes curb both wage and profit inflation and are distributionally neutral in LT

We argue that that ECB Excecutives have used the New-Keynesian Phillips curve model as a discursive depoliticisation device that has helped them present rate hikes as the ONLY viable option and mask their distributional consequences.

When inflation surged post-pandemic, the ECB's rate hikes were criticised for weakening labour markets even though profits were rising + for being too blunt a tool deal with a supply-driven inflation shock. How did the ECB respond?