ECB's Monetary Policy Strategy Review

banner strategy review

In January 2020, the Governing Council of the European Central Bank (ECB) launched a review of the Eurosystem's monetary policy strategy. This strategy was adopted in 1998, before the introduction of the euro, and some of its elements were clarified in 2003. Since then, the financial crisis and changes in the structure of the world economy have pushed the Eurosystem's key interest rates down, forcing it to resort to unconventional monetary policy measures. In addition, key challenges like climate change and digitalization, to name only two, have also transformed the environment in which monetary policy is being conducted. Against this backdrop, a review was overdue.

The Governing Council of the ECB decided to carry out this review in an inclusive manner by taking into account the views of civil society in each of the euro area Member States. Thus, each national central bank of the Eurosystem, including the BCL, has launched a consultation exercise with a wide range of stakeholders.

The scope of this exercise focuses on the quantitative definition of price stability, the various instruments of monetary policy, economic and monetary analysis, and communication patterns. Other considerations relating to financial stability, sustainable development and employment have also be taken into account.

To date the BCL has organized the following virtual events:

  • 03.11.2020: Internal listening event with BCL staff
  • 11.03.2021: Informal non-public listening event with the members of the Commission des finances et du budget (Cofibu) (Finance and Budget Committee of the national Parliament)
  • 16.03.2021: External listening event with representatives of the Syndicat des Villes et Communes luxembourgeoises (SYVICOL) (council of municipalities), the Cercle de coopération (platform of development aid organisations), the Fédération des acteurs du secteur social au Luxembourg (FEDAS) (federation of social sector stakeholders), Greenpeace Luxembourg and the Union luxembourgeoise des consommateurs (ULC) (representing consumers’ interests).
  • 27.04.2021: External listening event with representatives from the University of Luxembourg, the Association nationale des étudiants en sciences économiques (ANESEC), the Amicale et mutuelle des universitaires en sciences économiques (AMUSE), the Fondation des Universitaires en Sciences Économiques (FUSE) (three associations representing current or former economics students’ interests) and the Conférence nationale des professeurs de sciences économiques et sociales (CNPSES) (association representing teachers of economics and social sciences).

During these events, views on three topics were sought:

  • Session 1: What does price stability mean to you?
  • Session 2: How much priority do you think the ECB should give to "secondary objectives"?
  • Session 3: How do you perceive the communication of the ECB, or even the Eurosystem?

BCL Governor Gaston Reinesch welcomed the participants and introduced the topics. Dr Erny Gillen (Moral Factory) moderated the discussions.


Governor Gaston Reinesch and moderator Dr Erny Gillen

While participants currently were most preoccupied with the pandemic, they also acknowledged the importance of safeguarding price stability. A recurrent comment was that the robust and persistent increases in real estate prices in Luxembourg was contributing considerably to a discrepancy between measured and perceived inflation. However, integrating these asset price developments into the measurement of inflation was seen as a complicated endeavour.

Participants predominantly saw climate change as a secondary objective to which the Eurosystem should contribute. As for communication, participants expressed the need for more non-technical language that would be more suited for the public at large. Younger participants underscored the need to communicate more through social media.

The outcome of the ECB strategy review, which was conducted in strict compliance with the ECB's mandate to maintain price stability, has been published on 8 July 2021.

 Links to the ECB website providing more information on this strategic review: