The Governing Council of the ECBat the end of the usual Review on monetary policy strategyconfirms the Validity of the 2% symmetrical inflation objective in the medium term. This was announced today by the Eurotower, recalling that following the review of the strategy conducted in 2020-2021, the Board of Directors announced that it would have assessed the adequacy of its monetary policy strategy on a regular basis and this has already happened in 2021 and 2023. The next review is scheduled for 2030.
“I am pleased to announce that in its latest meeting the Board of Directors approved the updated monetary policy strategy of the ECB,” said the president of the ECB Christine Lagarde. “This evaluation offered us a precious opportunity to review our thoughts with critical spirit, verify our instrumentation and refine our strategy. It provides us with an even more solid basis to conduct monetary policy and fulfill our mandate to maintain prices in an increasingly uncertain context.”
Confirmed symmetrical inflation objective of 2%
The ECB therefore priority confirmed the Validity of the symmetrical inflation objective (in addition and less) by 2%, as the monetary policy strategy allows the Board of Directors to respond effectively to important variations in the inflation context.
The low inflation period and the clear acceleration of prices after the pandemic highlight the importance of a monetary policy strategy that allows the Board of Directors to respond effectively to important variations of the inflation context.
This is particularly relevant since i structural changes in progresslike economic and geopolitical fragmentation, the growing use of artificial intelligence, demographic changes and the dangers for environmental sustainability, suggest that the Inflation context will remain uncertain and potentially more volatilewith wider deviations from the 2% inflation objective in both directions, complicating the conduct of monetary policy
To maintain symmetry of the goal – explains the ECB – an action of monetary policy adequately incisive or persistent in response to large and durable deviations of inflation from the objective in both directions. This will contribute to Avoid the disancoding of expectations of inflation and the rooting of the deviation deviation from the objective.
Confirmed validity monetary political tools
The main tool for monetary policy are rates reference of the ECB. The Board of Directors can then use other toolsif appropriate, to direct the orientation of monetary policy in a context in which the reference rates are close to the lower limit or to preserve the orderly functioning of the mechanism of transmission of monetary policy. These tools include the refinancing operations at longer term, the purchases of activitiesi negative interest rates and the perspective indications on reference rates (Forward Guidance).
The ECB has therefore confirmed that all tools will remain available. Their use at any time will continue to be subject to an analysis of in -depth proportionality. Their choice, structure and application will be quite flexible It should be noted to respond to the variations of the inflation context.
In monetary policy decisions, the Board of Directors, in addition to taking into account the most probable trajectory of inflation and economics, Also consider the risks and uncertainty that surround them, also through the appropriate use of scenarios and sensitivity analyzes.
