ECB Reaffirms 2% Target, Commits to Flexible Policy Approach Amid Rising Uncertainty

30 June 2025

By David Barwick – FRANKFURT (Econostream) – The European Central Bank on Monday published the results of its latest strategy assessment, reaffirming its commitment to a symmetric 2% inflation target and pledging an agile and proportionate policy response amid a more volatile inflation environment.

‘I am happy to announce that the Governing Council during its latest meeting approved the ECB’s updated monetary policy strategy’, said ECB President Christine Lagarde. ‘This assessment was a valuable opportunity to challenge our thinking, check our policy toolkit and fine-tune our strategy. It provides us with an even stronger basis to conduct monetary policy and fulfil our mandate of price stability in an increasingly uncertain environment.’

The strategy update, which follows on from the comprehensive 2020–21 review, confirms the medium-term 2% target and underscores its symmetry. That implies a willingness to respond to both above- and below-target inflation, according to the ECB, which however stopped short of promising symmetry of the reaction function in all cases.

‘To maintain the symmetry of the target, appropriately forceful or persistent monetary policy action in response to large, sustained deviations of inflation from the target in either direction is important’, the ECB noted. ‘This will help to avoid inflation expectations becoming de-anchored and inflation deviations from the target becoming entrenched.’

All monetary policy instruments currently available remain part of the ECB’s toolkit, according to the central bank. Their use will continue to be guided by a proportionality assessment and implemented flexibly, the Governing Council said, so as to permit an ‘agile response’ to future shocks.

The ECB also highlighted growing uncertainty around the inflation outlook, citing ‘ongoing structural shifts, such as geopolitical and economic fragmentation, increasing use of artificial intelligence, demographic change and the threat to environmental sustainability’.

In future monetary policy decisions, the ECB said it would continue to assess not only the most likely path for inflation and the economy, but also associated risks and uncertainties, ‘including through the appropriate use of scenarios and sensitivity analyses.’

The first regular policy meeting applying the revised strategy will take place on 23-24 July 2025. The ECB plans to review the strategy again in 2030.