New inflation target to be discussed by ECB next week

Finnish central bank governor Olli Rehn

The European Central Bank will held talks on possible tweaks to its inflation target at a seminar next week, Finnish central bank governor Olli Rehn said on Friday, reinforcing expectations that the target could be finalised before a strategy review ends in mid-2021.

“Over the course of the autumn, the pace of our strategic work has accelerated, ” Rehn told reporters. “Next week we will concentrate on the price stability target, which is monetary policy’s hard core,” Rehn said.

The ECB, which now targets inflation at “below but close to 2%” is expected in the future to aim for 2%, with an explicit commitment to symmetry, suggesting that it will fight both overshooting and undershooting with the same vigour. This could also mean that after a period of undershooting the target, the bank would let it overshoot for some time.

The ECB’s strategy review will last until mid 2021 but some policymakers in private say that the inflation target component could be finalised sooner, perhaps even in January, and the later part of the review would focus on secondary objectives.

Similar articles