ECB ramps up its role in tacking climate change

(Reuters, 8 Jul 2021) Moves to shift policy come as top central banks worldwide acknowledge need to take greater account of climate issues.

The European Central Bank set a new inflation target on Thursday and carved out a major role in the fight against climate change, as Europe's most powerful financial institution embarked on the biggest overhaul in its 23-year history.

With inflation having undershot its target for nearly a decade, ECB President Christine Lagarde has driven an 18-month deep dive into the inner workings of the bank, challenging even fundamental principles of central banking in the hopes of resetting strategy and bolstering credibility.

In the key conclusion of the review, the central bank of the 19 countries that share the euro set its inflation target at 2% in the medium term, ditching a previous formulation for "below but close to 2%", which had created the impression it worried more about price growth above the target than below it.

Pioneered in the early 1990s by smaller central banks in New Zealand and Canada, inflation-targeting is widely credited with taming price growth and ushering in a period of stable prices, with the youngest generations having no experience with real inflation.

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Reuters, 8 Jul 2021: ECB ramps up its role in tacking climate change