July 9, 2021

ECB Raises Inflation Target To 2%

 The European Central Bank (ECB) set a new inflation target on Thursday and said it was prepared to let consumer prices soar above the target when deemed necessary.

In January last year, the ECB began its first policy review since 2003. However, the results of this work had to be postponed following the outbreak of the coronavirus outbreak and resumed last September.

The aim is to assess how to adapt the ECB’s policies and tools in achieving its primary target of price stability.

The ECB is currently trying to reach inflation levels ‘below, but almost 2%’. Going forward, the official inflation target will be 2% with ‘overshoot’ allowed.

These targets are symmetrical, which means the deviation of negative and positive inflation from the target is completely undesirable, according to the ECB in a statement.

Speaking at a press conference on Thursday, ECB President Christine Lagarde said the new inflation targets were clear and easy to deliver.

He also said that there will probably be a moderate temporary deviation in both directions of 2% and it is fine. What is most worrying is the significant, persistent, and significant deviation from the target and requires decisive action.

The next monetary policy meeting implementing this new strategy will be held on 22 July. Lagarde also said there will be a review of the new policy in 2025.