European Central Bank sets new inflation target, eyes climate change in strategic overhaul

FRANKFURT: The European Central Bank on Thursday set a new inflation target and integrated climate change considerations into its monetary policy strategy, the first major overhaul of its goals and tools in almost two decades.

Measures agreed by the 19-country single currency zone will have teeth, ECB chief Christine Lagarde promised. "This sets the bar for all central banks: They should follow the ECB's lead on climate, but faster," added the lobby group's financial expert in Germany, Mauricio Vargas. READ: MAS to deploy US$1.8 billion under green investment programme; aims for climate-resilient portfolioInflation in the eurozone has stayed low for years despite unprecedented economic stimulus from the ECB, keeping the target well out of reach and fuelling calls for a rethink."The Governing Council considers that price stability is best maintained by aiming for a 2 per cent inflation target over the medium term," it said in a statement.

Lagarde took pains to stress that the ECB did not go as far as the US Federal Reserve in offering more leeway for inflation fluctuations and that overshooting of the rate would be strictly temporary. The bank is currently operating an extremely expansionary policy, with ultra-low interest rates and a €1.85 trillion pandemic emergency bond-buying scheme, aimed at keeping borrowing costs low to spur spending and investment.

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