The European Central Bank will aim for 2% inflation over the medium term under a new monetary policy strategy, altering its target for what it considers to be "price stability."
The bank said Thursday its new target means moves both above and below 2% "are equally undesirable," a change from its previous target of below or close to 2%.
The bank's governing council said that the ECB's interest rates remain the primary monetary policy instrument, with forward guidance, asset purchases and longer-term refinancing operations to be "used as appropriate."
Also Thursday, the bank said that climate change has "profound implications for price stability" and committed to a new climate-related action plan.
The governing council is strongly committed to further incorporating climate-change considerations into its monetary policy framework; integrating climate change into macroeconomic modeling, statistics and monetary policy; and including climate-change considerations in monetary policy operations when it comes to disclosure, risk assessment, collateral framework and corporate sector asset purchases.
The announcements were welcomed by money management executives.
Regarding the move to a 2% target, the ECB's approach is "less forceful than the Fed's approach, which explicitly 'aims at' an overshooting, in consideration of past subpar inflation," Gilles Moec, group chief economist at AXA Investment Managers, said in a statement. "In the ECB's formulation, the governing council will still have to make a decision if and when inflation overshoots. It is a possibility, not an intention. Forward guidance is thus less strong."