• By The Financial District

ECB Sets 2% Inflation Target For European Economies

The European Central Bank (ECB) has shifted its inflation target during the governing council meeting on Thursday and set 2 percent as the target over the medium term, Joern Bender, Juergen Sabel, and Bernhard Funck reported for the Deutsche Presse-Agentur (dpa).

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"This target is symmetric, meaning negative and positive deviations of inflation from the target are equally undesirable," the council said, adding that forceful monetary policy could be needed to avoid negative deviations becoming entrenched.


"This may also imply a transitory period in which inflation is moderately above target," it said. Previously the target for the 19 members of the eurozone was "below, but close to, 2 percent."


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But with inflation below or above the 2 percent target now considered to be equally as bad as the other, the ECB will no longer feel obliged to act, should inflation creep above the benchmark. In addition, the bank is to include costs related to owner-occupied housing in its harmonized index of consumer prices, saying that this "would better represent the inflation relevant for households."


As this is a long-term project, the governing council will in the meantime take estimates of the cost of owner-occupied housing into account to supplement its set of broader inflation measures. The shift in the inflation target is the culmination of the review of monetary policy initiated by ECB President Christine Lagarde since taking office in November 2019.



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