Christine Lagarde hints at a major modification for the ECB’s inflation target
The European Central Bank could be about to tweak its main policy objective as it combats the economic fallout from the coronavirus crisis.
Since 2003, the central bank has targeted an inflation rate “below, but close to 2%” in an attempt to address concerns over significant consumer price rises. However, the ECB is currently more worried about sluggish price increases. As a result, a recent strategy review in Frankfurt could lead to a new target.
“In the current environment of lower inflation, the concerns we face are different (than in 2003) and this needs to be reflected in our inflation aim,” ECB President Christine Lagarde said at a press conference on Wednesday.
She spoke of a wider debate happening on whether central banks should commit to explicitly make up for inflation misses when they have spent some time below their targets.
“If credible, such a strategy can strengthen the capacity of monetary policy to stabilize the economy when faced with the lower bound,” Lagarde said.