ECB May Lower Target Inflation To 2%

The European Central Bank (ECB) may change the inflation target based on the assessment of its strategy, Bloomberg reports citing informed sources.

According to the agency, ECB leaders may abandon the current inflation target of “just below 2%” in favor of 2%. A more radical change in the approach to assessing price stability at the ECB may be considered too ambitious, sources say.

A transition to a solid inflation target of 2% in the medium term would ease the pressure on the ECB in terms of the need to tighten monetary policy after inflation in the Eurozone exceeds 1.5%.

Ideally, such a step should lead to an increase in inflation expectations – a key factor for generating real inflation – by creating some space to increase the price growth rate, sources say.

It is noted that there’s no unanimous opinion in the ECB with regards to the key forces that determine the situation in the Eurozone economy, as well as what steps should be taken in the current conditions. The key problem is that the ECB currently does not clearly understand why inflation has remained low for so long, sources say.

The ECB, which has been implementing a highly stimulating policy for eight years, buying bonds and keeping the deposit rate at a negative level, has not been able to achieve its inflation target. The growth rate of consumer prices in the Eurozone is below 1%, and experts continue to lower forecasts for the coming years.

The next ECB meeting will be held on December 12, and experts believe it is possible that the new chairman of the European Central Bank, Christine Lagarde, will announce the results of the ongoing evaluation of the strategy.

source: bloomberg.com

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