The European Central Bank (ECB) has warned of new challenges that could make inflation more volatile, including trade tensions and artificial intelligence.
In its first major strategy review since 2021, the ECB emphasised the need for flexibility in its monetary policy to address these challenges.
The ECB further maintained its inflation target at 2 per cent but acknowledged that the inflation environment would remain uncertain and potentially more volatile.
ECB will review its strategy again in 2030, just as it would continue to adapt its monetary policy tools to address new challenges and maintain price stability.
The central bank also pledged to use all its available tools in a “sufficiently flexible” manner to respond to changes in the inflation environment.
It listed several challenges facing central bankers, including: trade tensions, changes in U.S. trade policy under President Donald Trump, digitalization: of the economy among others
The ECB said it would take “appropriately forceful” actions if inflation deviated too much from its target.
It had faced criticism for moving too slowly to tackle surging energy and food costs triggered by Russia’s invasion of Ukraine and post-pandemic supply chain woes.
