ECB: No significant change to the current way of setting policy – Rabobank

The European Central Bank (ECB) announced on Thursday it approved its new monetary policy strategy that adopts a symmetric 2% inflation target over the medium term. According to analysts from Rabobank, this review mostly formalizes changes that have already been implemented. 

Key Quotes: 

“The ECB has agreed on a symmetric 2% inflation target, without a specific promise to make up for past inflation misses. Yet, the framework leaves the Council with the option to do so.”

“All in all, we doubt that these two updates to the inflation aim will mark a meaningful change from the policy implementation in recent past.”

“Will this significantly change the way policy is set? Probably not. In our view, the outcome of this review mostly formalises policy changes that have effectively already been implemented over the past few years. In a way, this new approach to symmetry is not unlike recent introductory statements, in which the ECB already stressed its “commitment to symmetry” and the hints that it may need to let inflation run a bit hotter in the future. Again, the new definition does not require an overshoot, but it doesn’t preclude one either. Moreover, although the goal has now been set, actual inflation has yet to follow.