Questions and answers on the strategy review

Last updated on 8 July 2021 to reflect the conclusion of the strategy review.

What was the strategy review about?

Every economy needs a safe and stable currency. The ECB’s main task, as the central bank for the euro, is to secure price stability in the euro area.

To ensure our strategy is fit for purpose and helps us fulfil our mandate of keeping prices stable, we reviewed our strategy together with the 19 national central banks of the euro area. The review was not about what we do but how we do it.

We looked at:

• what precisely we mean by “price stability”, that is, what rate of inflation we should aim for;
• the way we analyse the economy, to ensure we see risks to price stability in good time and understand how our decisions affect stakeholders like consumers, companies, markets and banks;
• how issues such as employment, social inclusion, climate change and financial stability are also relevant as we pursue our mandate;
• the monetary policy instruments we use, including interest rates and asset purchases;
• the way we connect to and communicate with you, because the euro is a public good and we want all citizens to understand our mission and decisions.

When did the ECB’s strategy review take place?

We launched the strategy review on 23 January 2020. We presented the outcome on 8 July 2021.

Strategy review hub page

Why did the ECB review its strategy in the first place?

Since our last strategy review in 2003 we have seen fundamental changes in the economy. Declining growth and the legacy of the financial crisis have driven interest rates down, making it harder for the ECB and other central banks to ease monetary policy when economic growth is slow. As a result, our set of instruments has expanded. Developments like globalisation, digitalisation, an ongoing ageing population and climate change also pose new challenges to the economy. We want to make our monetary policy strategy as effective as possible in this challenging and changing environment – both today and in the future.

There were a few issues that prompted us to launch a review in 2020.

Historically low interest rates

Rates are low for several reasons: the pace at which economies are growing over time is slowing, productivity (how efficiently we work) in most advanced economies is growing more slowly and the population is ageing. Slowing productivity and a declining active population drive down interest rates. An ageing population saves more money, which pushes interest rates down further.

Limits to lowering interest rates

Traditionally, central banks raise interest rates when inflation is too high. When inflation is too low interest rates are lowered to support economic activity. Current interest rates are close to zero or even negative, making it harder for the ECB and other central banks to lower rates in the typical way during periods of slow growth and low inflation. New instruments – non-standard monetary policy measures such as the asset purchase programmes – have been put in place to respond to these limits and ensure price stability.

Climate change, ongoing globalisation, rapid digitalisation and changing financial structures

These trends can have unexpected effects on the world, on the way the economy functions, and so also on our monetary policy.

How were Europeans able to provide their input?

As part of the strategy review we listened to the views of a wide range of stakeholders. We wanted to better understand people’s expectations and concerns to find the best way to fulfil our mandate of price stability.

Europeans had the chance to share their input via the ECB Listens Portal until the end of October 2020.

ECB Listens – Summary report of the ECB Listens Portal responses

We at the ECB and our colleagues from the national central banks hosted a series of conferences and workshops across the euro area. We wanted to hear from everyone, including the general public and civil society organisations.

We are planning to continue with such listening events in all euro area countries.

ECB Listens – Midterm review summary report More information on the national listening events

Did you share the input you received from your listening exercises during the review?

Yes. We published summaries of the comments we received from our listening exercises on our digital channels.

ECB Listens – Summary report of the ECB Listens Portal responses ECB Listens – Midterm review summary report

What do you mean by "it is not about what we do but how we do it"?

Our aim is laid down in the EU treaties. So our review covered all aspects of our monetary policy strategy, taking our mandate as a given. We approached the exercise with an open mind.

EU treaties

Did the strategy review also change how you supervise banks?

This strategy review covered different aspects of our monetary policy and did not encompass the ECB's role in banking supervision. The way we supervise banks is independent from how we conduct monetary policy.

Banking supervision

Was this the first strategy review the ECB has ever conducted?

The initial ECB monetary policy strategy was set out in 1998, the year that the ECB started its work. We evaluated and clarified this strategy in 2003.

Do other central banks also review their strategies?

Yes, other central banks also carry out strategy reviews. For example, the Federal Reserve System in the United States completed a review in 2020. In the UK, the Bank of England announced a year-long review process in January 2020. The Bank of Canada conducts a review of its inflation target every five years.