European Central Bank (ECB) has comprehensively revised its rulebook to allow for the expansion of its unprecedented stimulus package, directly refuting German politicians who fear that printing of billions of euros this year will trigger an inflation spiral.
After 18 months of review, the central banks of the 19 member states of the Eurozone stated that they would raise their inflation target from “below but close to 2%” to 2%, and said it would be easier to communicate with financial markets and the public.
Indicates that the central bank is under pressure In order to play an important role in combating climate change, the European Central Bank also stated that it will use its influence as a major lender to support the company only through its bond purchase program that promises to reduce carbon emissions.
President of the European Central Bank, Christina Lagarde, Said that the new strategy is easier to communicate and “will guide us to implement a solid foundation for monetary policy in the next few years.”
She denied that the central bank was “changing targets as prices started to rise”, saying that the review started long before the recent recovery and strong inflation growth.
She added that members of the ECB Council have always believed that the inflation target is “very close to 2%” and that the change is small.
In recent months, the Eurozone’s inflation rate has jumped to 2%, raising concerns that prices have begun to rise uncontrollably after more than a decade of weakening below 1%.
The European Central Bank’s Management Committee said in a statement: “When the economy is running close to [zero] Interest rates, which require particularly strong or sustained monetary policy actions to avoid negative deviations from the inflation target becoming entrenched. This may also mean a transition period when inflation is slightly higher than the target. “
Some German politicians expressed that they worry that the European Central Bank’s injection of 4 trillion euros into the euro zone economy under its quantitative easing policy will further put pressure on prices. Germany’s inflation rate rose to 2.55% in May.
Just last month, the governor of the German Central Bank, Jens Weidmann, who also served as the decision maker of the European Central Bank, called on the European Central Bank to control its stimulus plan, saying that “inflation is not dead.”
However, as labor shortages and stagnant supply of raw materials begin to ease, inflation in the euro zone is expected to fall in June, when data will be released later this month.This Spread of Delta variants in most parts of the world It is also expected to curb domestic demand and overseas trade, and further ease price pressures.
The Bank of England has set a 2% target, allowing its nine powerful monetary policy committees to “see through” periods when inflation is below or above the 2% target.