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ECB Strategy Review: ECB Sets Symmetrical Inflation Target

ECB Strategy Review: ECB Sets Symmetrical Inflation Target

Justin McQueen, Analyst

EUR/USD Price Analysis & News

  • ECB Announces New Inflation Target
  • ECB’s Lagarde Scheduled to Speak From 1330BST

ECB Strategy Review Recap

Inflation

The ECB will adopt asymmetrical 2% inflation target over the medium term. The central bank adds that they may also allow for a transitory period of inflation to overshoot their target. This differs from the prior forward guidance “close to, but below 2%”.

The Governing Council also confirmed that while HICP remains an appropriate measure for assessing price stability, the GC recognised that the inclusion of costs related to owner-occupied housing would better represent inflation relevant for households.

Interest rates

The ECB emphasised that interest rates will remain the primary tool for monetary policy with other tools such as forward guidance, asset purchases and longer-term refinancing operations helping mitigate the limitations stemming from interest rates at the lower bound.

Climate Change

With the ECB ascknowledging that climate change has implications for price stability, the bank has underlined a commitment to increasingly reflect environmental sustainability considerations in its monetary policy (Climate Change Plan).

Looking ahead

ECB President Lagarde is scheduled to give a press conference regarding the strategic review from 1330BST. In terms of a market reaction to the review, little seen in the Euro as the broader backdrop remains the key driver at present. Alongside this, following yesterday’s source reports, the review was very much in line with expectations.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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