The European Central Bank’s meeting next week will see policymakers discuss changing the forward guidance they give on the direction of policy following the ECB’s shift to a more symmetrical 2% inflation target.
“Next week we will discuss new forward guidance that includes the new definition of price stability,” ECB Vice President Luis de Guindos said on Monday at an event organised by London-based think-tank OMFIF.
“The formulation of the forward guidance has to be modified to include the new definition of price stability.”
A long-awaited ECB strategy review last week saw the bank tweak its inflation target to a flat 2% in the medium term from “below but close to 2%” previously.
The ECB’s current guidance says it will pump in stimulus via bond buys for as long as necessary and keep interest rates at their current record-low, sub-zero levels until it has seen the inflation outlook “robustly converge” to its goal.
De Guindos said that while the 19-country euro zone economy was currently in recovery mode, the situation remained “fragile” due to the ongoing coronavirus pandemic, adding that some members, like Spain, were not doing as well as Germany.
“We will need to maintain favourable financing conditions,” the former Spanish economy minister said. “The withdrawal of the fiscal and monetary stimuli has to be very prudent, very gradual and should not be premature.”