The European Central Bank announced on Thursday adjusted inflation target and climate effects Reuters

Frankfurt (Reuters)-The European Central Bank will announce the results of an 18-month strategic review on Thursday to redefine its inflation target and determine the role it plans to play in combating climate change.

The ECB’s first review since 2003 has been one of the bank’s president Christine Lagarde’s priorities since he succeeded Mario Draghi at the end of 2019, and the new strategy may herald The biggest transformation of a still relatively young institution.

In the long-term flagged measures by policymakers, the bank may set its inflation target at 2%, abandoning the current statement of “below but close to 2%”, giving the impression that it is more worried about price growth above the target Not under it.

The goal may also be declared symmetrical. But after nearly a decade of falling below the inflation rate, investors will pay close attention to clues on whether the European Central Bank is willing to allow inflation to overspend after the price slump.

They will also pay attention to whether the European Central Bank will follow the example of the U.S. Central Bank and target average inflation over a period of time to make up for the loss of price growth.

The explicit mention of tolerance for inflation overshoot may be seen by investors as a commitment to maintain ultra-loose monetary policy for a longer period of time, and as a guarantee that 2% is not the current upper limit.

But such a move may be politically risky, especially among the Germans in the way of inflation, the German central bank governor Jens Weidmann has long opposed it.

On the issue of climate change, the European Central Bank seems almost certain to use its banking supervisory department to force companies to make more climate-related information disclosures.

Increasing collateral requirements for polluting companies or adjusting asset purchases around climate targets are also on the table, but it seems to have caused even greater controversy among the 25 members of the management committee.

The European Central Bank will announce the results of the review at 1100 GMT, followed by a Lagarde press conference at 1230 GMT.