The European Central Bank (ECB) officially launched the long-awaited review of its monetary policy strategy earlier this month. As the first such review since 2003, it is welcome, if not late. ECB President Christine Lagarde has signaled an ambitious process that “will leave no stone unturned”.

Much attention was paid to its plan to incorporate climate change factors into the work of the ECB. Other major topics, such as the need for a digital euro, could also be presented. However, the ECB must first reassess its core work on monetary policy optimization in order to achieve price stability.

Together with other central banks, the ECB has learned the difficult way how difficult it is to convey convincingly to households, companies and the financial sector. Markets sometimes doubt the desire of central banks to adhere to the rate they announced and proved to be correct. Public perceptions of inflation are very different from official indices. In the euro area, households estimate inflation averaged 9% annually in 2004-2018, while the true figure is 1.6%.

If the private sector does not trust or misunderstand central banks, monetary policy will be less effective as people will refrain from basing their decisions on it. Popular concerns about what the central bank is doing may also erode its political legitimacy.

It would be useful for the ECB to follow the example of the US Federal Reserve is conducting roadshows across the country in order to promote two-way communication.

However, there is also a technical problem arising from the ECB’s current definition of its inflation target – below but close to 2%. It’s unclear: how close is it? It also signals that the central bank is more interested in preventing inflation from rising above 2% than falling below this level, although both Lagarde and her predecessor have insisted the target is symmetrical. The mere fact that they had to be persistent, however, proves that the perception of downward bias is difficult to dispel.

The price index used by the ECB also muddles the waters of monetary policy. It may not cover the experience of the population with price pressures and include import prices over which the central bank has less influence than inflation generated internally.

At a minimum, the review should resolve these issues. It should take into account alternative inflation measures. Above all, it must resolutely remove the doubts about symmetry by removing the phrase “below but close to”. Strong arguments were made for targeting a range rather than an exact number for inflation. Since central banks are rarely able to achieve a well-defined objective with precision in a free-market economy, the availability of such is making it difficult to explain the policy to the public.

At the same time, adopting a target range should not become an excuse for hawkish sentiment, nor should it create new ambiguity. According to one proposal, the range should be within 1.5-2 percent. However, this would seem to justify past failures in trying to reach 2 percent inflation and would support a downward bias. It would also unnecessarily divert the euro area from the 2% target followed by other major currency regions.

The range does not necessarily have a center point. It is the central responsibility of central banks to provide borrowers and creditors with certainty about the value of a long-term loan. The target range would provide the ECB with the necessary flexibility, but a more specific fundamental objective is desirable. This could be achieved by combining a target range of, say, 1.5-2.5% in the medium term with a view to 2% inflation in the long term.

The inflation target is not the ECB’s only weakness, but correcting it would be a good start to Lagarde’s reform agenda.