ECB revises strategy: focus on price stability in turbulent times

ECB revises strategy: focus on price stability in turbulent times

The European Central Bank (ECB) has revised its monetary policy strategy in order to better respond to the current global challenges. The move, announced on Monday by ECB President Christine Lagarde during the annual top conference in Sintra, follows growing global political tensions and uncertainties in the global economy. Lagarde emphasized that ensuring price stability has become increasingly complicated.

The new ECB strategy makes it clear that the central bank is “fit for a changed world”. This adjustment is in line with the need to also take into account future risks, particularly with regard to climate issues.

Inflation target and climate risks

The core of the new monetary policy strategy is an inflation policy target of 2 percent in the medium term. This was set with the aim of integrating climate risks into the ECB's economic considerations. The Harmonized Index of Consumer Prices (HICP) remains the central measure for price developments. The Governing Council also recommends the gradual inclusion of owner-occupied residential property in the HICP.

The new strategy is the result of an in-depth review process that began back in January 2020. ECB President Lagarde and the ECB Council have also adopted a climate-related action plan to address the influence of climate change on monetary policy.

Monetary policy instruments

Key interest rates remain the ECB's most important monetary policy instrument. In addition, other instruments such as forward guidance, asset purchases and longer-term refinancing transactions will remain part of the future toolkit. The first regular monetary policy meeting to apply the new strategy is scheduled for July 22, 2021.

The ECB plans to review its monetary policy strategy regularly, with the next comprehensive review scheduled for 2025. This early adjustment underlines the central bank's efforts to be able to react flexibly to changing economic conditions in order to keep the European economy stable.

For more information on the details of the new monetary policy strategy, visit Süddeutsche.de and Bundesbank.de.