ECB strategy adjustment: Lagarde announces introduction of scenario analysis to address inflation uncertainty.

European Central Bank President Lagarde stated that the strategy adjustment announced on Monday will allow policymakers to communicate more effectively in an increasingly unpredictable world. Lagarde said, "Our updated strategic commitment is aimed at ensuring that our policy decisions not only consider the most likely path of inflation and the economy, but also take into account relevant risks and uncertainties, including through appropriate use of scenario and sensitivity analysis." It is reported that on Monday, the European Central Bank adjusted the way it uses monetary policy to guide the economy, stating that it will more cautiously weigh the risks to the inflation outlook and the policy tools employed in achieving the 2% inflation target. The European Central Bank confirmed on Monday that it will take a symmetric approach to keeping price growth in line with the target level in the medium term, and stated that "appropriate and forceful or persistent policy responses" will be taken in response to significant and sustained deviations in either direction. This is different from the policy strategy assessment results four years ago. At that time, policymakers pledged to take "particularly forceful or persistent" actions when the economy was "close to its lower bound" to avoid entrenched low inflation. This adjustment was announced during the European Central Bank's annual central bank forum in Sintra, Portugal, in response to unprecedented spikes in inflation in 2021 and 2022, which caught the European Central Bank off guard and sparked criticism of its delayed interest rate hikes. Officials launched this assessment last summer to prepare for a more frequent and disruptive economic shock environment in the context of globalization, decarbonization, and changing demographics. ECB President Lagarde stated at a press conference, "The value of this assessment lies in it being a strategic approach applicable to various scenarios." She acknowledged that previous assessments lacked foresight and were more influenced by the European Central Bank's past experiences. Lagarde pointed out in her opening speech at the forum that this approach would have been useful in 2021, when rapid global economic reopening driven by vaccine deployment also led to skyrocketing inflation. She said, "Scenario analysis could have helped us understand that the range of inflation outcomes at that time could be unusually wide, reducing the risk of conveying false certainty to the public."