At the same time, however, in its endeavors to ensure price stability in the currency area of the 19 countries in the medium term, the ECB will in future accept inflation rates “moderately above the target value” at least at times. With such a “symmetrical” inflation target, the central bank is no longer forced to react immediately if the inflation rates temporarily deviate upwards or downwards from the percentage target.
The euro currency watchdogs also recommend that in future the prices for owner-occupied residential property should also be included in the calculation of the inflation rate, which for them is a key indicator for their monetary policy. However, the ECB sees this as a longer process.
The changed inflation target is a core result of the review of the monetary policy strategy initiated by the ECB President Christine Lagarde, who has been in office since November 2019. Over the past 18 months, the focus has been on formulating price stability, the monetary policy instruments and communication of the central bank.
The main goal of the central bank is a balanced price level – in the jargon of the monetary authorities: price stability. The ECB sees this most likely if prices in the euro area rise moderately. For this reason, when the ECB was founded in June 1998, an inflation target at a distance from zero was chosen.
However, the inflation rate in the euro area has often been well below the two percent mark since 2013. And this despite the fact that the ECB has been pumping huge sums of cheap money into the markets for years and keeping interest rates at a record low. Critics have long accused the ECB of having maneuvered itself into a dead end with its rigid inflation target and are calling for more leeway.
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
