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European Central Bank sets its inflation target at 2% in new policy review

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The Governing Council of the European Central Bank (ECB) published on Thursday its new monetary policy strategy that adopts the symmetric 2% inflation target over a medium term.

We consider the price stability is best maintained by aiming for a 2% inflation target over the medium term. This target is symmetric indicating that negative and positive deviations of inflation from the target are equally undesirable,” said the Governing Council in a press release.

ECB confirmed that the set of its interest rates remains the primary monetary policy instrument and approves its new monetary policy strategy.

“The new strategy is a strong foundation that will guide us in the conduct of monetary policy in the years to come,” said President of the ECB, Christine Lagarde.

ECB stated that the Harmonised Index of Consumer Prices (HICP) remains the appropriate measure for assessing price stability and it recognizes that the inclusion of the costs related to owner-occupied housing in the HICP would better represent the inflation relevant for households and that the inclusion of owner-occupied housing in the HICP is a multi-year project.

The Governing Council acknowledged that climate change has profound implications for price stability and, accordingly, it has committed to an ambitious climate-related action plan.

The first regular monetary policy meeting of the Governing Council applying the new strategy will be held on 22 July 2021 and ECB intends to assess periodically the appropriateness of its monetary policy strategy, with the next assessment expected in 2025.