More leeway - that sounds good at first.
But what does the European Central Bank's new inflation target mean for savers?
Economists have a clear opinion on this.
Frankfurt / Main - Europe's monetary authorities are gaining more leeway on the subject of inflation and are thus cementing the low interest rates in the euro area, according to economists.
The European Central Bank (ECB) is aiming for an annual inflation rate of two percent for the currency area of the 19 countries, as the central bank announced on Thursday.
That is a little higher than the previously estimated “under, but close to two percent”.
At the same time, however, the ECB, in its efforts to ensure price stability in the medium term, will in future accept inflation rates that are at least temporarily “moderately above the target value”.
With such a “symmetrical” inflation target, the central bank is no longer forced to react immediately if inflation rates temporarily deviate upwards or downwards from the percentage target.
"With its new inflation target of two percent, the European Central Bank is gaining more leeway to maintain its extremely expansionary monetary policy even when prices rise," commented Christian Ossig, General Manager of the Association of German Banks (BdB).
"That means that the economy and savers in the euro area will unfortunately have to continue to adjust to negative interest rates for the foreseeable future."
The changed inflation target is the core result of the internal review of the monetary policy strategy initiated by the ECB President Christine Lagarde, who has been in office since November 1, 2019.
This also includes consultations with consumer associations and social partners as well as citizen voices.
The new inflation target does not mean a delay in tightening monetary policy, assured Lagarde when presenting the results of 18 months of strategy debate in Frankfurt.
“We are committed to the target of two percent.” The central bank will not tolerate any permanent significant deviation from the inflation target.
The central bank intends to use the new strategy as a basis for the next regular meeting of the Governing Council on July 22nd.
Lagarde himself also wrote climate protection on the flags in the process.
The Governing Council has now decided on “a comprehensive action plan with an ambitious roadmap for further integrating climate protection considerations into its monetary policy framework”.
When buying corporate bonds, the ECB has already started to take into account "relevant risks of climate change".
Whether central banks should support environmental policy goals is controversial.
Greenpeace demanded again that the ECB should “no longer favor climate-damaging companies” with their billion-dollar bond purchases from today.
The main goal of the central bank is and remains a balanced price level - in the jargon of the monetary authorities: price stability.
“We only have one needle in the compass.
We have to guarantee price stability, ”former ECB President Jean-Claude Trichet had repeatedly emphasized.
If inflation is too high, consumers lose purchasing power and the currency has less support.
On the other hand, if prices stagnate or fall across the board, this can tempt consumers and businesses to postpone investments.
Because it could soon be even cheaper.
This waiting can slow the economy down.
Therefore, Europe's monetary watchdogs see price stability most likely when prices in the euro area rise moderately.
For this reason, an inflation target that is far from zero was chosen.
When the ECB was founded in June 1998, the euro central banks defined price stability at an annual rate of inflation of “less than two percent”.
In 2003, the Governing Council specified that the medium-term target would be an inflation rate of “below, but close to, two percent”.
So now two percent.
The ECB thus joins the choir of the world's leading central banks.
The US Federal Reserve had also signaled that it would tolerate inflation rates temporarily exceeding this target.
In the euro area, the rate of inflation has often been well below the two percent mark since 2013.
And this despite the fact that the ECB has been pumping huge sums of cheap money into the markets for years and to this day and keeping interest rates at a record low - both of which are tried and tested means in economic theory to increase inflation.
Nevertheless, inflation in the euro area continued to lag for a long time.
Critics have long accused the ECB of having maneuvered itself into a dead end with its rigid inflation target and called for more flexibility. For savers, however, this also has a downside: the more leeway the ECB gives itself, the longer the central bank could hold on to zero and negative interest rates.
The new goal is paving the way for "higher inflation rates," says ZEW researcher Friedrich Heinemann. "Because inflation below two percent is now just as bad as inflation above two percent, it will be even easier for the Governing Council to justify a continuation of the extremely loose monetary policy and bond purchases in the coming years." Volker Wieland said it was good that the inflation target “was not massively raised to three or four percent as some have suggested. In my opinion that would have been a mistake. "
The monetary authorities meet their critics when it comes to the question of whether the cost of owner-occupied residential property should be included in the calculation of the inflation rate.
In Germany in particular, the idea is widespread that the official inflation rate for the euro area is distorted downwards simply by the way it is measured.
The ECB now recommends that the costs for owner-occupied residential property be taken into account “step by step” in the future.
At the same time, the monetary authorities are asking for patience when it comes to housing costs: it will "take several years" before these data are included in the harmonized consumer price index HICP, which the ECB uses for its monetary policy.
The monetary policy strategy is to be put to the test for the next time in 2025. dpa