The ECB’s inflation target: flexible future
News from 2020-08-04 / KfW Research
The European Central Bank (ECB) is currently reviewing its monetary policy strategy. The central element in this process is the inflation target - in an environment of significantly lower rates of inflation than at the time the current target of "below, but close to, 2%" was set. We consider it particularly sensible to make the target more flexible, which would also allow inflation rates below 2% to be tolerated. Such a more flexible target would be compatible with the fulfilment of the ECB's mandate, would take account of the current new reality of low inflation, would give the ECB greater room for manoeuvre and, in perspective, would also make it easier for it to exit from its unconventional measures.