SAWT BEIRUT INTERNATIONAL

| 5 August 2021, Thursday |

ECB makes good progress in reshaping strategic goals, Lagarde says

President of European Central Bank Christine Lagarde said on Sunday that policymakers meeting this weekend has made “good progress” in reshaping the ECB’s strategic goals, including the role it plays in fighting climate change and a revised approach to inflation.

The 25 members of the ECB’s Governing Council met in a hotel near Frankfurt to add impetus to the bank’s first review of its approach to monetary policy in nearly two decades, which it aims to conclude in the second half of the year.

Lagarde said talks covered the ECB’s inflation goal and time horizon, links between climate change and monetary policy and the modernization of central bank communications.

“I am glad we were able to have in-depth discussions and we made good progress in shaping the concrete features of our future monetary policy strategy,” Lagarde said in a statement after the three-day gathering.

Started in early 2020 and then postponed due to the coronavirus pandemic, the overhaul has fuelled a public debate among policymakers.

The ECB’s elusive inflation goal, currently set “below but close to 2 percent” seems almost certain to get a facelift and be set at 2 percent, with a tolerance for overshooting after periods of sluggish price growth.

The ECB could also look at alternative inflation measures to take account of rising housing costs for households, and even calculate its own inflation figures – though, with inflation having lagged below target goal for a decade, that might risk giving the impression of massaging numbers.

Climate change, a factor Lagarde is eager to incorporate, is expected to become part of the central bank’s considerations in some form, potentially by skewing its bond purchases to favour companies that have a lower carbon footprint or are making an effort to reduce it.