The ECB is no inflation targeter

This is not a cynical statement of fact. I admit I was dumbstruck when I read this:

The ECB has never subscribed to inflation targeting.

(…) The ECB does not react mechanically to data like other central banks. It does not react directly to the change in relative prices. And it does not target inflation at a relatively short and fixed-term horizon.
This strategic approach is mirrored in the ECB’s definition of price stability. (…)

The ECB clarified in 2003 that, “within this definition”, it aims to keep inflation rates below, but close to, 2 per cent over the medium term.

This is from former ECB board member Jürgen Stark in the FT.

This is not semantics. This says that price stability and 2% inflation are not the same target. And price stability is the more important one.

This is the reason there is such a thing as the “Weidmann rule“. This opens the door to discretion (and thus policy surprises). This is why they talk constantly about “well-anchored expectations”.

When price stability is the core objective of the ECB and not the same thing as stable price growth (aka inflation), an asymmetric reaction to inflation is fully in line with the mandate. Asymmetric here means that the ECB worries about too much, but not about too little inflation. Everything above zero, but below 1.9 is fine.

I have to read up on the details of their mandate and will dissect it over a few future posts.