ECB Announces New Monetary Policy Targets

The European Central Bank’s meeting today, Thursday, July 22, was quiet but announced new monetary policy targets that suggest extending support for a longer time to the eurozone economy while boosting inflation, which has been low for nearly a decade from its 2% target.

The bank said it expects interest rates to remain at current levels or below until inflation hits the 2% target “well before” the end of its forecast horizon while keeping borrowing costs unchanged until the end of its forecast horizon.

The bank also said that the efforts to raise inflation should be consistent with the bank’s target of 2% in the medium term.

“This may also imply a transition period in which inflation will be moderately above target,” the central bank statement said.

At a press conference following the ECB’s decision, President Christine Lagarde said that the September forecast is more indicative of expectations and will influence the next ECB policy. However, she also added that exceeding the inflation target would be accidental rather than deliberate.