In July 2021, the ECB's target was revised, specifying that the 2% inflation rate threshold should be applied symmetrically and with a medium-term orientation. We argue that a symmetric inflation target can significantly contribute to anchoring inflation expectations and to limiting the risks due to the zero- and/or effective-lower bound constraints. The monetary policy strategy revision will play a key role in the policy mix between fiscal and monetary policies for the post-pandemic recovery.
This paper was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 15 November 2021.
|WP17.21 - The Implementation and Rationale of the ECB’s New Inflation Target.pdf||677.94 KB|