Christine Lagarde, President of the European Central Bank (ECB), will hold a press conference at 12:30 GMT on Thursday to discuss the central bank’s Strategy Review.
Three probable EUR/USD movers to watch at the ECB Special Meeting
The ECB would be sending a signal by eliminating a single word, “below,” indicating that it does not consider 2% annual headline inflation as a ceiling, but rather as a more symmetric aim. Will Europe follow America’s lead? The Fed went even further, enabling future, high inflation to make up for past weakness. For the German hawks, that would be a step too far.
The ECB has set a symmetric inflation objective of 2%.
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.
Policymakers from the European Central Bank will convene in Frankfurt for a special meeting to finalize the institution’s strategy review. The meeting is anticipated to complete work on a revised definition of price stability. While the gathering isn’t a formal monetary policy meeting, it could influence the ECB’s intentions for when and how to end the emergency measures it implemented during the pandemic. Its bond-buying program, worth 1.85 trillion euros ($2.19 trillion), is expected to last until March 2022./n
