ECB’s Weidmann on Strategy Review: Not Aiming for Above or Below 2%

9 July 2021

By David Barwick – FRANKFURT (Econostream) – The outcome of the European Central Bank’s strategy review establishes a clear target monetary policy will aim neither to overshoot nor undershoot, ECB Governing Council member and German Bundesbank President Jens Weidmann said Friday.

A statement issued on the Bundesbank’s website said that Weidmann considered the strategy review outcome as positive for price stability.

‘An inflation rate of 2% in the medium term is clear and easy to understand as a target. We are not aiming for lower or higher rates. That was important to me’, he was quoted as saying.

Weidmann echoed the strategy review statement in noting the possibility of deviations from the target in either direction. ‘But we do not make our monetary policy dependent on missed targets in the past: Our strategy remains forward-looking and takes into account the new challenge of the effective interest rate floor’, he said.

The support expressed by the Governing Council for including owner-occupied housing costs in the relevant measure of inflation was welcomed by Weidmann. ‘In this way, the price measurement comes even closer to the reality of people's lives on average’, he said.

The new importance of climate change for monetary policy received only a muted endorsement. ‘Climate change and climate protection will play a significant role in how we fulfil our mandate in the future’, he said. ‘We are not only expanding our analytical capacities. It is right that we start in particular with the financial risks from climate change and climate policy, demand the disclosure of necessary information and improve our risk management.’