Announced last week, the ECB’s new strategy allows it to tolerate inflation higher than its 2% goal when rates are near rock bottom, such as now.
This is meant to reassure investors that policy won’t be tightened prematurely and boost their expectations about future price growth, which has lagged below the ECB’s target for most of the past decade.
“Given the persistence that we need to demonstrate to deliver on our commitment, forward guidance will certaintly be revisited,” Lagarde told Bloomberg TV.
The ECB’s current guidance says it will buy bonds for as long as necessary and keep interest rates at their current, record-low levels until it has seen the inflation outlook “robustly converge” to its goal.
Lagarde did not elaborate on how that message might change, simply saying the ECB’s aim will be to keep credit easy.
“My sense is that we will continue to be determined by maintaining favourable financing conditions in our economy,” she said.
She added this was not the right time to talk about dialing back stimulus and that the ECB’s Pandemic Emergency Purchase Programme, which is worth up to 1.85 trillion euros, could “transition into a new format” after March 2022, its earliest possible end-date.
Source: Economy - investing.com
