On Thursday, the European Central Bank (ECB) approved its new monetary policy approach, which calls for a symmetric 2 percent inflation objective over the medium run. This assessment, according to Rabobank analysts, largely formalizes modifications that have already been implemented.
“The ECB has agreed on a symmetric 2 percent inflation objective, with no particular commitment to make up for previous inflation shortfalls.” The framework, however, gives the Council the choice to do so.”
“Overall, we doubt that these two changes to the inflation target will represent a significant departure from prior policy implementation.”
“Will this have a substantial impact on how policy is made?” Most likely not. In our opinion, the outcome of this study primarily formalizes policy changes that have been in force for a number of years. In some ways, this new approach to symmetry resembles the ECB’s previous introduction statements, in which it emphasized its “commitment to symmetry” and hinted that inflation may need to run a little hotter in the future. The new definition does not necessitate an overshoot, but it also does not prohibit it. Furthermore, despite the fact that the target has been set, actual inflation has yet to follow./n
