The European Central Bank (ECB) has, after an 18-month review, said it would shift its inflation target from “below but close to 2%” to a 2% target.
The ECB president, Christine Lagarde, said the new strategy was simpler to communicate.
She said it is “a strong foundation that will guide us in the conduct of monetary policy in the years to come,'' adding that ECB council members always considered the inflation target to be “very close to 2%” and the change was only modest.
In a statement, the ECB governing council said: “When the economy is operating close to [zero] interest rates, it requires especially forceful or persistent monetary policy action to avoid negative deviations from the inflation target becoming entrenched. This may also imply a transitory period in which inflation is moderately above target.”
Meanwhile, eurozone inflation is expected to have fallen back in June which figures that are released later this month could reveal.
Additionally, the spread of the Delta covid variant is being closely watched by investors concerned that it will suppress domestic demand, international trade and weigh on prices.
The euro is higher on the day due to the new inflation target.