ECB Changes Forward Policy Guidance

July 22, 2021

At today’s scheduled European Central Bank Governing Council meeting, news was made even though the interest rate structure (a zero percent refinancing rate of zero percent since September 2 the quantitative stimulus. A change in expressed guidance over what to expect from the bank’s policy in the future, officials now say that interest rates will not be raised until the medium-term 2.0% symmetrical inflation target is seen happening well before the policy horizon and accompanied by confidence that inflation will be stabilizing at 2%. What all this means is that it’s entirely possible that a temporary spell of inflation above 2.0% will be tolerated, and that’s a new concession. In discussing the economy, officials do not expect the recent pickup of inflation to endure and foresee subdued inflation continuing in the medium term. Asset purchases are to continue at a pace of around EUR 20 billion per month.

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