higher inflation, which become increasingly more costly as the level of the inflation target rises. this new objective provides a clear target, replacing what had become an ambiguous and unclear objective ( which defined price stability as an annual increase in prices of below 2 percent and specified an inflation aim of “ below, but close to, 2 per cent ” ). we have also made clear that the 2 per cent target is symmetric : it is equally undesirable to have inflation that is too high above or too far below 2 per cent ( recognising that economies are changing constantly and that inflation will not be 2 per cent precisely all of the time ). the main reason for these changes is that, compared to when the last strategy was agreed in 2003, disinflationary pressures have become more acute. the need for a clearer target had become self - evident and a perception that the “ close to but below ” objective was asymmetric may have contributed to the decline in inflation expectations and the persistence of low inflation over the last decade. in such a disinflationary environment, we want to make clear that we will take forceful action to respond to inflation below our target ( as well as, of course, inflation that was above the target ). we will tolerate small deviations in either direction over short, transitory, periods to ensure the smooth functioning of the economy. ( unlike the us federal reserve, we decided against adopting “ average inflation targeting ”. although we are both central banks, our mandates are different and, overall, we decided that our new target was simple, clear and easy 1 / 2 bis central bankers'speeches to communicate, and more appropriate for the ecb. ) second, we decided that we will take account of the cost of owner - occupied housing when assessing price pressures. this would better reflect people ’ s experience of inflation ( as we heard when we consulted the public last year ). we also laid out a roadmap for how to include these costs in our target measure of inflation. ultimately, this is a decision for the european statistical system but, in the meantime, we will use standalone data on housing costs to inform our monetary policy assessments. third, climate change has been a key issue in our review. while governments have the primary responsibility to act and mitigate the effects of climate change ( after, of course, the actions of individual households and businesses ), central banks can also play an important role. last week we committed to an action plan

that further incorporates climate change considerations into our policy framework, recognising that the transition to net zero emissions has significant implications for the economy and for price stability. fourth, we decided to make a step change in our communications, in particular with the public. it ’ s important that the citizens of the euro area understand our decisions and better, more targeted, communications – including regular outreach events – will help us do that. finally, we also decided to commit to periodic reviews of our monetary policy strategy and to conduct the next one in 2025. we don ’ t want to wait for another 18 years! the changes i have outlined – including our inflation target, the measure we use, and the transition to net zero – will guide us over the coming years, and ultimately help maintain price stability across the euro area. so will the new strategy lead to immediate change in the daily lives of businesses and consumers? no. in the very short run, people may not notice a change. but the new strategy will improve our ability to respond to economic shocks that threaten price stability and the economy. our policy decisions will now be taken in line with our new strategy, but they will also continue to depend on economic activity, and, in the near - term, the lifting of the health restrictions introduced to manage the pandemic and the pace at which the government decides to withdraw the significant supports it has put in place. across the euro area, the economy is gradually reopening as vaccination coverage continues to expand. in ireland, thanks to the public health and community response, we can see light at the end of the tunnel. we expect the irish economy to recover strongly in the second half of the year but uncertainty regarding the evolution of the pandemic remains. of course, the impact of covid - 19 is not the first, and won ’ t be the last, shock to affect the euro area. as monetary policymakers, we at the governing council need to be aware of risks on the horizon, and ensure that our policy tools are ready when needed to minimise the fallout of downturns on households and businesses. i believe we did that last week. * this blog is adapted from governor mahlouf ’ s earlier op - ed in the irish times. 2 / 2 bis central bankers'speeches