ECB revised its monetary policy strategy – what’s changed?

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Title: ECB revised its monetary policy strategy – what’s changed?
Author: Kilponen, Juha ; Kontulainen, Jarmo
Organization: Bank of Finland
Series: Bank of Finland. Bulletin
Series volume: 95
Series number: 4/2021
Year of publication: 2021
Publication date: 12.10.2021
Pages: 52-66
Subject (yso): rahapolitiikka; strategia; inflaatio; ilmastonmuutokset; työllisyys
Keywords: EKP; inflaatiotavoite; rahapolitiikan strategia; inflaatio-odotukset
Other keywords: climate change; employment; inflation; inflation targeting; monetary policy; monetary policy strategy
Abstract: The ECB’s revised monetary policy strategy has now been adopted. The new 2% inflation target is clear and unambiguous. The target is symmetric, meaning both negative and positive deviations of inflation from the target are considered as equally undesirable. Commitment to the symmetric inflation target requires especially forceful or persistent monetary policy measures when interest rates are close to their effective lower bound. This may imply a transitory period in which inflation is moderately above target. A medium-term orientation with the inflation target also allows the ECB to emphasise sustainable growth and full employment in its decision-making. In its monetary policy, the ECB also takes into account environmental sustainability, in line with the new climate-related action plan.
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