The effects of the ECB’s new inflation target on private households’ inflation expectations by Mathias Hoffmann, Emanuel Moench, Lora Pavlova, Guido Schultefrankenfeld published by VOXEU (12/2021)
In July 2021, the Governing Council of the ECB announced its new monetary policy strategy. Having previously pursued to keeping inflation “below, but close to, 2%” over the medium term, it now considers price stability to be best maintained by aiming for a 2% inflation target over the medium term. The new target is “symmetric”, meaning that deviations both above and below target are equally undesirable. To prevent negative deviations becoming entrenched, however, the ECB’s actions might result in the possibility of transitory periods in which inflation is moderately above 2%.
