Daily Management Review

ECB sets to bring eurozone inflation down to 2%


The European Central Bank (ECB) plans to reach its 2% inflation target by 2025, the Financial Times reported, citing internal documents from the regulator.

"The European Central Bank expects to reach its elusive 2% inflation target by 2025, according to unpublished internal scenarios," the newspaper said.

As the paper notes, it also suggests that the watchdog will raise its deposit rate from a record low of minus 0.5 per cent at least a year earlier than most economists expect. The ECB deposit rate was lowered to minus 0.5% from minus 0.4% in 2019.

The ECB's inflation target had previously been at "just below 2%", but in July the ECB adjusted its medium-term target, raising it to 2%.

This happened at a time when inflation began to accelerate in the countries of the currency bloc, for example, consumer prices there rose at an annual rate of 2.2% at the end of July and then again one month later to the highest rate since 2011 of 3%.

For this reason, the ECB also had to increase its year-end inflation forecast in September from the previous 1.9% to 2.2%.

The latest meeting of the ECB took place on September 9. According to its results, in addition to adjusting the inflation forecast, the regulator kept the basic interest rate at zero level, as well as parameters of asset purchases within the framework of a special program of Pandemic Emergency Purchase Programme (PEPP).

At the same time, the central bank also allowed for the possibility of a reduction in the pace of asset purchases.

source: ecb.europa.eu