After a six-month review of monetary policy, the ECB announced last month that its objective was to keep inflation "close to 2 percent over the medium term." Previously, the bank had declared its goal to be keeping inflation "below 2 percent."

The ECB's chief economist, Otmar Issing, who dominates bank policy discussions, tells Institutional Investor that the statement was merely a "clarification" rather than a policy shift. He insists, moreover, that the ECB won't set interest rates any differently than before.

Nonetheless, others detect more than a clarification.

For critics of the ECB who had been hoping that the bank would use the review to forthrightly adopt a more stimulative and activist monetary policy, the statement was a big disappointment. They've criticized the bank's "below 2 percent" inflation objective as potentially deflationary as well as imprecise.

The formula seemed to imply a range somewhere between zero and 2 percent. And given the disparity in inflation rates within the euro zone -- more than 4 percent in Ireland but just 1 percent in Germany -- aiming for an areawide inflation rate of between zero and 2 percent could push the Germans into a deflationary spiral. Issing acknowledged that risk last year when he said that the ECB wanted to keep inflation above 1 percent; analysts took that pronouncement to mean that the bank's real inflation target was about 1.5 percent.

With the latest statement Issing and ECB president Wim Duisenberg are aiming to reassure investors and consumers that the bank is alert to the danger of deflation.

"We carefully assess the risks to price stability, and by that we mean both directions," Issing said in an interview late last month. "If we identified a risk of deflation, we would act in a timely and decisive way."

The new phrasing of the policy goal suggests that the ECB's inflation target is really closer to 2 percent. After all, the euro zone's inflation rate has averaged 1.98 percent since the single currency was launched in 1999. "They have simply taken their track record and established it as the benchmark," theorizes Thomas Mayer, European economist at Deutsche Bank Securities in London.

Despite an overall European inflation rate in excess of 2 percent over the past two years, the ECB cut interest rates 2.25 percentage points in that period -- implying that the bank is as concerned about growth as inflation. "They've been increasingly tolerant of inflation in the 2 to 3 percent range," says David Walton, European economist at Goldman Sachs International in London. "The way the ECB behaves these days is no different from the way the Bank of England behaves."

If that is so, say many economists, then the ECB should go a step further and mimic the BoE's precise inflation targeting. A higher target rate -- say, 2.5 percent -- would provide more insurance against deflation.

By contrast, the new "close to 2 percent" goal looks like a compromise between a faction of the bank's governing council members, led by Duisenberg and Issing, who seem to fear that a shift in policy would dent the bank's credibility, and a more activist camp believed to be led by vice president Lucas Papademos. The old guard is "still fighting an old war, the war against inflation," says Paul De Grauwe, an economist at the Catholic University at Leuven in Belgium. "Now the risks are different."

Issing rejects the idea of a British-style inflation target. Such an approach implies greater precision in controlling the inflation rate than central banks can achieve, he contends. He also dismisses calls for the bank to issue detailed minutes of its policy discussions, arguing that they would not provide any better information than Duisenberg's monthly press conferences. "We are convinced that our approach to transparency is the appropriate one," he says.

All of which suggests that the game of semantics between the ECB and its watchers will continue. "The frustration is that we need to bring in linguists to interpret their statements," says Charles Wyplosz, an economist at the Graduate Institute of International Studies in Geneva. "They may have created even more confusion than before." To central bankers, that's not necessarily a bad thing. Just ask Alan Greenspan.