In contrast to a ceiling at that level, the European Central Bank has changed to a symmetric inflation target of 2%. This is a dovish shift, but one that markets had anticipated. The ECB emphasized that short-term departures from that goal, such as a moderate period above target, would be permitted. This is a reversal of the Federal Reserve’s loose monetary policy, which allowed increased inflation to compensate for past undershooting.
The Frankfurt-based institution has stated that interest rates will continue to be the principal tool for monetary policy, with the next review scheduled for 2025.
The ECB suggests gradually increasing owner-occupied housing expenses over time. It has not, however, changed its inflation target and will continue to use the Harmonized Index of Consumer Prices (HICP) as its key price stability indicator. That’s a little more dovish than I was expecting.
The EUR/USD exchange rate has dipped from 1.1844 to 1.1835, a small drop from recent highs.
Prior to the publishing, the EUR/USD attempted a recovery, recapturing the 1.18 level and moving toward 1.1850.
See ECB Strategic Review: A Sneak Peek. There are three potential EUR/USD movers to keep an eye on./n
