ECB forgoes stabilising inflation before 2025 to avoid damaging economy

ECB night

Minutes of the last monetary policy meeting. The ECB council considers that restoring price stability before that date would “depress economic activity to an unnecessary level”.

Inflation has become a burden for the euro area and, in general, for all regions of the world. Central banks are fighting with all their might to try to regain the price stability dictated by their mandate, but some are already beginning to do so with an eye on the economy.

One of them is the European Central Bank (ECB). According to the minutes of the last monetary policy meeting held on 27 July, the members of the Governing Council agreed to reach the inflation target in 2025, and not before, to avoid causing excessive damage to the economy by tightening.
“The time at which the Governing Council expects inflation to return to target has been moved from the last quarter of 2024 to 2025.

While bringing inflation back to target with the earlier timing might require depressing economic activity to an unnecessary level, it was seen as particularly important not to extend the horizon over which the target is reached beyond 2025,” the minutes revealed yesterday.

The ECB has been revising its inflation projections upwards for more than a year and pushing back the date by which it believes it will reach the target back to 2%. After the latest aggregate data for the euro area, published on Thursday, price growth stands at 5.6%.

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