ECB's strategy addresses inflation deviations from 2 per cent target

The European Central Bank (ECB) pledged on Monday to react with equal vigour when inflation was too high as when it was too low, tweaking its overarching strategy after being blind-sided by a surge in prices in recent years.

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The ECB's new five-year strategy follows a rollercoaster period in which it went from worrying about deflation during the pandemic to a cost-of-living crisis exacerbated by Russia's invasion of Ukraine and, most recently, disruptions from a simmering trade war.

In its new strategy statement, the eurozone’s central bank kept a pledge - fought over internally - to deploy “especially forceful or persistent monetary policy measures” but said it would do so when inflation strayed far from its 2 per cent target in either direction.

The European Central Bank's previous strategy statement, published in 2021 when inflation had just started rising, was mostly focused on the risk of price growth getting stuck at low levels, something now seen as a mistake by some central bankers.