Who started monetary policy

ECB starts to review its monetary policy strategy

  • Review includes quantitative formulation of price stability, monetary policy instruments, economic and monetary analysis and communication policy
  • Other considerations such as financial stability, employment and environmental sustainability are also part of the review
  • Review should be completed by the end of the year
  • Review is based on thorough analysis and openness, to include all stakeholders

The Council of the European Central Bank (ECB) started a review of its monetary policy strategy today. The monetary policy strategy was defined in 1998 and some elements of the strategy were refined in 2003.

The euro area and global economies have faced profound structural changes since 2003. The decline in trend growth due to slowing productivity and an aging population, as well as the aftermath of the financial crisis, have resulted in lower interest rates. The latter reduces the scope of the ECB and other central banks to ease monetary policy through conventional monetary policy instruments in the event of unfavorable economic developments. In addition, low inflation presents us with different challenges than we know from a historical perspective from coping with high inflation. The threat to the environment, rapid digitization, globalization and changing financial structures have further changed the environment in which monetary policy operates and the dynamics of inflation.

In view of these challenges, the Governing Council decided to begin a review of the monetary policy strategy, with full respect for the ECB's price stability mandate enshrined in the Treaty.

“Our economies are experiencing profound changes. It is time for a strategy review so that we can fulfill our mandate in the interests of Europeans, ”said ECB President Christine Lagarde.

In the course of an inventory, the Governing Council will examine how the fulfillment of the ECB's mandate enshrined in the Treaty has been supported over the years by the monetary policy strategy and whether strategic elements need to be adjusted. One focus will be on the quantitative formulation of price stability and the approaches and instruments with which price stability is achieved. The review will also look at how other considerations, such as financial stability, employment and environmental sustainability, can play a role in fulfilling the ECB's mandate. The Governing Council will review the effectiveness and possible side effects of the monetary policy tools developed over the past ten years. It will examine how the economic and monetary analysis on which the ECB's assessment of price stability risks is based should be updated, also in the light of existing and new developments. Finally, he will review his communication policy.

The process should be completed by the end of the year. The Governing Council will be guided by two principles: thorough analysis and openness. The Eurosystem will therefore seek cooperation with all stakeholders.

Media inquiries are to Ms. Eva Taylor (Tel. +49 69 1344 7162).