Lagarde: ECB’s 2% Inflation Target ‘Simple, Solid, Symmetric’

The ECB has revised its inflation target to a clear and symmetric 2%, emphasizing a medium-term orientation. This change allows for better monetary policy maneuverability and aims to reduce welfare costs associated with high inflation. The ECB recognizes the constraints of the effective lower bound and is prepared to respond forcefully, accepting that inflation may temporarily exceed the target. The term 'transitory' is defined as a flexible period, determined by the Governing Council's discretion. The ECB remains committed to its objectives, focusing on the solidity and symmetry of its inflation target.

Discuss the implications of the ECB's commitment to a 2% inflation target.

How does the ECB plan to respond to the constraints of the effective lower bound?