ECB Strategy Review: More tolerance for inflation?

The ECB is currently reviewing its monetary policy strategy. The publication of the results was announced for the second half of the year. However, the central bankers might present them as early as the ECB's monetary policy forum in Sintra, which takes place from June 30 to July 2. Below, we will address the most important questions regarding the strategy review.

What is the Strategy Review?

A monetary policy strategy describes how a central bank makes its decisions to fulfill its mandate. This includes, among other things, the concrete definition of its inflation target, how it intends to achieve this target, and in what manner it communicates its monetary policy goals and decisions to the public. In a changing world, it is only logical to regularly review and adjust the monetary policy strategy. This is to ensure that the ECB's monetary policy measures and goals are effective and appropriate to the current economic conditions. Other central banks – such as the Federal Reserve at present – are also reviewing their monetary policy strategies.

The ECB's monetary policy strategy was first established in 1998 when it began its work. In 2003, this strategy was reviewed and refined; for instance, an inflation target of "below, but close to 2%" was set. It was not until 2020/21 that the next strategy review took place, which was quite extensive given the long period during which the monetary policy strategy had remained unchanged. In 2024, the ECB initiated the current strategy review.

For full text see attached PDF-Version.