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Fed Policy Shift Raises Heat on the ECB

  • President Lagarde has already initiated a Fed-style review
  • Challenge is that ECB policy has been ultra-loose for years
Commuters in La Defense as France Economy Gets Into Recovery Stride
Photographer: Nathan Laine/Bloomberg

The European Central Bank is probably a step closer to aiming for periods of inflation above its goal now that the U.S. Federal Reserve has adopted that strategy, according to economists and its former vice president.

The Fed’s new approach, unveiled by Chair Jerome Powell on Thursday, is to seek inflation that averages 2% over time. That would allow it to tolerate a faster pace after periods of weakness, avoiding early interest-rate hikes when price growth moves close to its target.