“A symmetry requires a suitably vigorous or persistent monetary policy response to large and sustained deviations of inflation from the target in any direction,” stated the ECB in a press release.
The ECB established a symmetric inflation target of 2% over the medium term four years ago, making positive or negative deviations from this target equally undesirable.
The ECB will also have all the existing instruments at its disposal to conduct monetary policy, including debt purchases and very long-term refinancing operations.
The choice, design, and implementation of these instruments will allow the ECB to “respond swiftly to new shocks,” the ECB added in the statement.
The ECB warns that “structural changes, such as geopolitical and economic fragmentation and the increasing use of artificial intelligence, make the inflation environment more uncertain.”
The president of the ECB, Christine Lagarde, stated that the strategy assessment “provides an even stronger foundation to guide monetary policy” and fulfill the price stability mandate in an increasingly uncertain environment.
Lagarde and the ECB’s chief economist, Philip Lane, are holding a press conference in Sintra, Portugal, today to explain the details of the strategy review.
The ECB revised its strategy in 2021 and stated at that time that it would periodically assess its adequacy.
“The inflation environment will remain uncertain and possibly more volatile, with larger deviations from the target” due to geopolitical tensions, the increasing use of artificial intelligence, demographic changes, and threats to environmental sustainability, said the ECB.
“In its monetary policy decisions, the ECB’s Governing Council takes into account not only the most likely trajectory of inflation and the economy but also the risks and the uncertainty surrounding them, including the appropriate use of scenario and sensitivity analyses,” the statement said.
The first monetary policy meeting of the ECB’s Governing Council where the updated strategy will be implemented is scheduled for July 23 and 24, 2025.
The ECB Governing Council plans to conduct the next assessment in 2030.
