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Staff of Reuters 3 minutes Read this article (Adds detail) Reuters, FRANKFURT, July 7 – The European Central Bank will release the results of an 18-month strategy review on Thursday, revising its inflation target and outlining its role in the battle against climate change. Since taking over from Mario Draghi in late 2019, Christine Lagarde has made it one of her top priorities to conduct the ECB’s first review since 2003, and the new approach might herald the institution’s largest overhaul ever. In a move widely anticipated by policymakers, the bank is expected to establish its inflation objective at 2%, abandoning its current language of “below but close to 2%,” which gave the appearance that it was more concerned about price growth above than below the target. It’s also conceivable that the aim will be deemed symmetric. Investors will be looking for signals as to whether the ECB will be willing to let inflation overshoot following periods of low price rise after nearly a decade of undershooting it. They’ll also be watching to see if the ECB, like its American counterpart, would aim average inflation over time to compensate for lost price growth. Investors are likely to interpret an explicit reference to allowing an inflation overshoot as a pledge to keep monetary policy ultra-easy for an even longer period, and as a guarantee that 2 percent is not a cap, as it is currently viewed. However, such a step could be politically perilous, especially among Germans who are concerned about inflation, and Bundesbank president Jens Weidmann has long opposed it. The ECB appears almost set to utilize its bank supervision arm to compel corporations to provide more climate-related disclosures. Raising collateral requirements for polluting companies or skewing asset purchases toward climate targets have also been discussed, although these appear to be creating more disagreement among the Governing Council’s 25 members. The ECB will release the review’s findings at 1100 GMT, followed by a press conference by Lagarde at 1230 GMT. (Balazs Koranyi contributed reporting; Jonathan Oatis and John Stonestreet edited the piece.)/nRead More

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