ECB Steps in to Tackle Bond Market Turmoil

ECB Presents Strategic Exploration Results

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The European Central Bank (ECB) will present the results of its strategic exploration on Thursday. The central bank also looked at the official inflation target and the role of the ECB in the fight against climate change.

 

Current bank president Christine Lagarde announced the exploration after taking office. Since 2003, the ECB has not evaluated its official policy. Since then, the central bank has been targeting inflation “close to but below 2 percent”.

The Federal Reserve in the United States, the system of central banks there, indicates that the price depreciation may well be above 2 percent for a while but should remain below 2 percent in the longer term. Southern European countries, in particular, see something in this for the ECB.

A third option is that the inflation target will be exactly 2 percent, making it clear that the ECB will take action in the event of both lower and higher inflation.

The inflation target affects many other things. Firstly, this directly impacts interest rate policy, but the ECB can also adjust the method of measuring inflation. In addition, decisions need to be made when and how the support packages due to the corona crisis and the previously initiated buying program to increase inflation will be phased out.

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