Illustration: Sarah Grillo/Axios

The European Central Bank [ECB] is the oldest inflation target in the world, and certainly the one that carries the most political baggage. This week, with very little fanfare, it changed dramatically.

Background: Germany's Bundesbank implemented an inflation target in 1975 — a full 15 years before New Zealand's target was formally adopted. Germany's target started at 4.5%, but it rapidly fell to 2% in 1987, and was never subsequently changed.

  • Over the course of the postwar era, Germany's strong currency and low inflation played a proud and central role in the country's national identity. That was all thanks to the Bundesbank, which had one primary function — to safeguard the currency. Germany's target wasn't enshrined in law, like New Zealand's was, but it helped to shape a nation.
  • When the Deutsche mark was replaced by the euro, the ECB inherited the Bundesbank's 2% inflation target. That target, then, has now been in place for 32 years.

For all those 32 years, the inflation target has been a ceiling: The aim of the central bank was to get inflation down to 2% or lower. If inflation in Germany was 3%, that marked a failure on the part of the Bundesbank. If inflation was 1%, that was fine.

Driving the news: The official ECB statement accompanying its latest monetary policy decision this week included an important new word. "If the medium-term inflation outlook continues to fall short of our aim," it says, "the Governing Council is determined to act, in line with its commitment to symmetry in the inflation aim."

What they're saying:

"The symmetry means basically that there is no cap, or 2% cap, and that inflation can deviate on both sides. We don't accept permanently lower inflation rates,"
— Draghi, in his post-meeting press conference.

No Bundesbank president would ever have said something like "We don't accept permanently lower inflation rates." Quite the opposite. Permanently lower inflation rates were the German central bank's stated aim, and the ECB largely inherited that aim. That's now, officially, a thing of the past.

Why it matters: ECB president Mario Draghi is painfully aware that ultra-loose monetary policy — like the deposit rate of -0.4%, which still has the power to startle — has done little to spark inflation in the eurozone. He knows too that his successor, Christine Lagarde, will need to use all her political skills to cajole Europe's governments into providing fiscal support for her monetary actions. With this action, he has given Lagarde all the headroom she needs to keep monetary policy as loose as she possibly can, even if inflation exceeds the 2% target.

Go deeper: More negative interest rates won't save Europe

Go deeper

Updated 58 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 7 a.m. ET: 19,655,445 — Total deaths: 727,353 — Total recoveries — 11,950,845Map.
  2. U.S.: Total confirmed cases as of 7 a.m. ET: 4,998,802 — Total deaths: 162,425 — Total recoveries: 1,643,118 — Total tests: 61,080,587Map.
  3. Politics: Trump signs 4 executive actions on coronavirus aid — Democrats, and some Republicans, criticize the move.
  4. Public health: Fauci says chances are "not great" that COVID-19 vaccine will be 98% effective — 1 in 3 Americans would decline COVID-19 vaccine.
  5. Science: Indoor air is the next coronavirus frontline.
  6. Schools: How back-to-school is playing out in the South as coronavirus rages on — Princeton, Johns Hopkins, Howard to hold fall classes online.

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Will you step back into an elevator any time soon?

Why it matters: Tens of billions of dollars — and the future of cities around the country — rest on the answer to that question. So long as workers remain unwilling to take elevators, hundreds of billions of dollars' worth of office real estate will continue to go largely unused.

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Brazilian President Jair Bolsonaro posted a photo of himself to Facebook congratulating his soccer team, Palmeiras, for winning the state title Saturday, moments after the health ministry confirmed the national COVID-19 death toll had surpassed 100,000.

Why it matters: Brazil is only the second country to confirm more than 100,000 deaths from the coronavirus. On Sunday morning, it became the second country to surpass 3 million cases, per Johns Hopkins. Only the U.S. has reported more. Bolsonaro has yet to address the milestones. He has previously tested positive for COVID-19 three times, but he's downplayed the impact of the virus, which has crippled Brazil's economy.

Editor's note: This article has been updated with the latest coronavirus case numbers and more context.