Giant leap for ECB is small step for euro zone swahapattanaik
The European Central Bank said on July 8 it would target 2% inflation over the medium term and that positive and negative deviations from the target were equally undesirable.
The announcement, which followed an 18-month review of the ECB’s monetary policy strategy, marked a shift from the central bank’s earlier goal of maintaining inflation close to but below 2%. The earlier formulation created an impression that the ECB was more concerned by exceeding its inflation target than falling short of it.
“When the economy is operating close to the lower bound on nominal interest rates, it requires especially forceful or persistent monetary policy action to avoid negative deviations from the inflation target becoming entrenched,” the ECB said. “This may also imply a transitory period in which inflation is moderately above target.”
The central bank also said it would further incorporate climate change considerations into its policy framework. For example, it plans to start disclosing climate-related information for its corporate sector bond purchase programme by the first quarter of 2023, and said it would incorporate climate change criteria into the framework that it uses to guide those purchases.