The ECB intends to raise the inflation target to 2%

The leaders of the European Central Bank (ECB) announced that the regulator will raise the inflation target to 2% and is ready to allow even exceeding this level. The previous figure has been at «slightly lower but close to 2%» for almost 20 years.

The ECB's updated strategy is likely to allow the European Central Bank to justify maintaining an ultra-soft monetary policy for a long time, given that the ECB has been trying for many years to push inflation, the low rate of which has limited the economic potential of the eurozone.

In addition, the rise in inflation will also determine the ECB's actions in an environment when the eurozone economy is recovering from the pandemic. The Central Bank's leadership is expected to start discussing the issue of gradually phasing out incentives, including an emergency program for the buyback of assets worth 1.85 trillion euros.

Last month, the head of the ECB Christine Lagarde noted that the regulator is ready to take action in response to both too low and too high inflation, but market participants often do not understand what exactly the central bank is ready to do. In the updated strategy, this problem is solved by linking inflation expectations to the new goal.