The European Central Bank has experienced a major change by abandoning the dogma of inflation ” below but close to 2% “. The institution chaired by Christine Lagarde now allows inflation to exceed 2% temporarily to support activity.
There is no question of raising interest rates, even if inflation exceeds the target ” below but close to 2% Which has been dogma in Frankfurt for the past 18 years. Christine Lagarde, the presidency of the European Central Bank, anticipated the results of the strategic review which were to be announced this autumn. Among these conclusions, a major change for the institution: “ the 2% [d’inflation] are not a cap She said. Consequently, the ECB allows inflation to temporarily exceed 2%, which is its current level in the euro zone.
The rise in prices is the result of the end of the health crisis: after a catastrophic year 2020 in terms of activity, the economic recovery is in full swing in the 19 countries of the euro zone. There is no question of breaking this momentum, the European Central Bank wants to ensure that the recovery takes root. Therefore, there is no question of taking out the monetary artillery and the rise in interest rates to “cool” a temporarily overheated activity.
A symmetrical lens
This new 2% target, simpler than the convoluted wording imposed by the Bundesbank in 2003, is intended to be more ” symmetrical “: Christine Lagarde explained that being below or above this threshold was” also undesirable “. There is therefore no longer any incentive to post inflation below 2%, which could push the ECB to act preventively and slow down activity. In doing so, the European institution is aligned with the strategy adopted by the US Fed last year.