The European Central Bank (ECB) carried out its monetary policy strategy review, which it had planned for 2020 but postponed due to coronavirus (Covid-19) yesterday. As a result of the evaluation, the target was determined as symmetrical 2 percent.

At the meeting, which was delayed for a year due to an coronavirus, the ECB launched its first policy review since 2003. At the heart of this policy review was to assess how the ECB would calibrate its policy instruments to ensure price stability.

The text published by the ECB noted that under symmetrical inflation, it was decided to revise the inflation target and allow consumer prices to exceed when deemed necessary, while working to reach a level below or close to 2 percent in the current framework. The official inflation target will be set at 2 percent, with allowable overruns.

The new strategy will take effect after the Monetary Policy Board (MPC) meeting on July 22, the ECB said, adding that the inflation target could rise above 2 percent and they have agreed to a symmetrical 2 percent target in the medium term. "This target is symmetric, meaning negative and positive deviations of inflation from the target are equally undesirable," ECB also added.

"The Governing Council in its monetary policy assessments will take into account inflation measures that include initial estimates of the cost of owner-occupied housing to supplement its set of broader inflation measures...Other instruments, such as forward guidance, asset purchases and longer-term refinancing operations, that over the past decade have helped mitigate the limitations generated by the lower bound on nominal interest rates will remain an integral part of the ECB’s toolkit, to be used as appropriate."

"While taking the ECB’s primary mandate of price stability as a given, the review has allowed us to challenge our thinking, engage with numerous stakeholders, reflect, discuss and reach common ground on how to adapt our strategy. The new strategy is a strong foundation that will guide us in the conduct of monetary policy in the years to come," said President Lagarde.

Lagarde, who said that the old inflation target is generally very detailed, argued that the new target has removed uncertainty. In addition, the assessments will be carried out on a regular basis, Lagarde added, pointing to 2025 for the next assessment.