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ECB Strategy Review: A Tweak, a Leap, and a Missed Opportunity

The Washington Post  | Tue, Jul 13, 2021

by Paul J. Sheard


The European Central Bank has released the results of its 18-month monetary policy strategy review. Abandoning its previous woolly one, the ECB has adopted a symmetric 2% inflation target and it is formally incorporating climate change considerations into its policy framework. But the ECB missed an opportunity to hammer home that increasingly expansionary monetary policy needs to be buttressed by expansionary fiscal policy.  

The ECB’s adoption of a symmetric 2% inflation target, symmetric in the sense that deviations from the target in either direction are considered equally undesirable, represents a further milestone in the evolution of its conceptualisation and operationalisation of price stability, and brings the central bank more in line with standard international practice.  

In 1998, the Governing Council of the ECB defined “price stability” as consumer price inflation of less than 2%; in 2003 the Governing Council announced that henceforth it would aim to achieve inflation of “below, but close to, 2 percent" over the medium term. 

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