The ECB changes its inflation policy, the 2% target is no longer realistic

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After the Federal Reserve, the ECB also opens to a revision of the inflation target: “Today the concerns are different” said Christine Lagarde, who specified that today the concerns are different than in 2003, when it was indicated that the target was that inflation remained “close to but below 2%”.

ecb inflation

The European Central Bank evaluates a possible turning point in its monetary policy choices. According to President Christine Lagarde, one of the primary objectives defined by the ECB in its mandate, that of keeping inflation “close to but below 2%”, could actually be overtaken by events. An indication that comes a few days later from the Fed’s change in inflation and monetary policy, with President Jerome Powell who for the first time indicated the 2% inflation target for the US central bank not as a maximum level but as a level medium, thus leaving the US economy the possibility of making prices run a little more than normally expected.

The wording of the ECB’s inflation target, indicated in 2003 as below but close to 2%, explained Lagarde during the conference The ECB and its watchers, “was appropriate for a period in which the ECB he was trying to assert his credibility and too high inflation was the main concern”. Now however “in the current situation of low inflation, concerns are different and this must be reflected in our inflation target”.

Lagarde therefore assured that the ECB will continue to guarantee its support. In the current situation “monetary and fiscal policies must remain expansionary for as long as is necessary to achieve their respective objectives”. The president added that this alignment of fiscal and monetary policy “raises important questions that will become more acute after the pandemic”, in particular the direction to take “in the face of levels of public debt that will perhaps be permanently higher”.

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