ECB: A symmetric inflation target? – ABN AMRO

According to analysts at ABN AMRO, the ECB has been criticized for the asymmetric inflation target, a criticism which has also been levelled at the Fed.

Key Quotes

“Bloomberg reported that European Central Bank staff have begun studying a potential revamp of their inflation goal, according to officials familiar with the matter.”

“Draghi said at the June press conference that "the conviction that we should pursue our objective in a symmetric fashion was also expressed". He has actually been in "camp symmetry" since at least 2016 (speech).”

“The same goes for former chief economist Peter Praet (here). Also Rehn has supported a symmetric approach (here). “Following this policy would help prevent the drifting of inflation expectations persistently below the target.”

“If ECB formally goes for revamping the goal towards "symmetry" around 2% it's dovish and "lower-for-longer". But a caveat would be that given how successful Draghi has been over the years in guiding expectations it ought to be at least partly priced-in. For example, long-term breakeven inflation rates rose only a couple of basis points in a reaction to the Bloomberg story.”