European Central Bank (ECB) officials said that inflation is “close to 2 percent in the medium term, but it is below this level. under Agreed to update it to raise its “holding” target to 2 percent and allow it to rise above that level as needed.
The decision was made at a special meeting held to complete the ECB’s strategy review, which ended Wednesday, Bloomberg reported.
This decision, which is part of the biggest strategy change in the ECB monetary policy in the last 20 years, indicates that the central bank has changed tactics in its fight against sub-target inflation for years.
Inflation target definition was vague
Some ECB officials found the definition of inflation target “close to 2 percent in the medium term but below this level” too vague.
ECB Board Member Isabel Schnabel also signaled on Saturday that the ECB could allow inflation to exceed the target.
The Fed, the US Federal Reserve, revised its monetary policy last year and switched to average inflation targeting, allowing inflation to exceed the 2 percent target in the periods following low inflation processes.