For a long time, the inflation target of the European Central Bank was defined as the year-on-year growth of the harmonized index of consumer prices close to two percent, but at the same time below this limit. Now the central bank has decided to refine its goal.
The European Central Bank adjusted its definition of its inflation target on Thursday. According to central bankers, the current wording “close, but at the same time below two percent” did not sound very clear. It is now newly defined as “two percent per year in the medium term”.
“We believe that the 2% inflation target is clearer and easier to communicate, and at the same time well-balanced,” Christine Lagarde, President of the European Central Bank, told a news conference after the ECB leadership.
Lagarde emphasized that the ECB was aware that inflation could not be exactly two percent permanently, but that it tended to deviate in both directions. “It’s okay,” she added. However, some experts claim that it is, in a sense, a slight loosening of the inflation target, which also comes at a time when the world is facing unusually high inflation and the ECB seems to be sending a signal that it will be more lenient on inflation.