However, in recognition of the effective lower bound on interest rates, the ECB has stated that it will also employ forward guidance, asset purchases and longer-term refinancing operations, or any other instrument, as appropriate. In this respect, let me very briefly mention some relevant elements in relation to these nonconventional monetary policy instruments. 6  Regarding forward guidance on interest rates, at end-July 2021, the ECB revised this monetary policy tool to bring it into line with the new strategy. In particular, the revised forward guidance incorporates the 2% symmetric inflation target and establishes three conditions that need to be fulfilled before the ECB Governing Council raises its interest rates. First, we have to observe “that inflation reaches 2% well ahead of the end of its projection horizon”. As ECB President Christine Lagarde explained following the announcement of the new forward guidance, “well ahead” basically refers to the mid-point of our projection horizon, which covers two to three years. 5 Second, inflation must be at 2% “[…] durably for the rest of the projection horizon”. And third, the Governing Council must consider "that the progress realised in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at 2% over the medium term".
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