European Central Bank policymakers reach an early agreement on strategic reforms
The European Central Bank’s policymakers have agreed to its first new strategy in nearly two decades. It will be announced on Thursday and may modify the inflation target while addressing climate change and housing costs.
The 25 members of the Central Bank Management Committee met in Frankfurt on Wednesday to resolve the central bank’s results. 19 months of reviewThe news was originally scheduled to be announced in September, but after policymakers agreed on certain matters, ECB President Christine Lagarde sought to conclude negotiations.
The European Central Bank said on Wednesday evening that the “core decision” will be announced on Thursday at 13:00 Central European Time (12:00 GMT), after which Lagarde and Vice President Luis de Guindos will be in an online press conference. Announce the results on.
It is expected that the strategic review will lead to major changes in the operation of the European Central Bank.
The most fundamental change may be how it defines its core mission of “price stability”. After years of failing to raise inflation to its target, the European Central Bank is expected to abandon its target of “close to but below 2%”, which is considered too opaque and means setting a ceiling on price growth.
The council generally supports the more direct 2% target. The central bank may emphasize that its new target is symmetrical, so policymakers worry about both exceeding and falling below the target. The target will be a medium-term target, which can flexibly fluctuate in either direction in the short term.
however.The European Central Bank is unlikely to go as far as the Fed. The Fed has officially committed to let inflation Exceed goal To make up for the period of low price growth.
Morgan Stanley’s European Economics Director Jacob Nell said that he expects this change to “will only have a moderate impact on monetary policy stance in the short term” because the central bank has implicitly accepted this strategy.
But he said that other expected changes will “have far-reaching effects over a longer time frame.”
Since succeeding Draghi in November 2019, Lagarde has been urging the European Central Bank to address the growing public and political concerns about climate change. After the early opposition from other board members fades, the idea is expected to become the core of the new strategy.
The central bank is expected to announce plans Green transition In its monetary policy. It will keep its asset purchase portfolio and collateral rules away from high-carbon companies that have no plans to achieve the EU’s net zero emissions target by 2050.
This change may be carried out in stages within a few years, as it requires companies and the EU to establish more information disclosure Green Classification System For investors, this will list which areas are climate friendly.
The central bank will also promote the European statistical agency Eurostat to add housing in its inflation calculations to address public concerns about monetary policy not fully considering rising housing costs.
According to recent research by the European Central Bank, housing prices in most parts of Europe are rising, and this change will increase the current inflation rate by about 20 basis points. At other times, it will reduce the overall rate of price growth.