The Governing Council of the European Central Bank (ECB) has published the results of its recent 2025 strategy assessment and thus updated its monetary policy strategy. This review is part of the periodical assessment introduced by the Governing Council following the comprehensive strategy review carried out in 2020‑21. Its aim is to ensure that the ECB’s monetary policy framework, toolkit and strategic approach remain fit for purpose even in a changing economic environment.

Background and objective of the strategy assessment

The monetary policy strategy enables the ECB’s Governing Council to respond in a timely manner and effectively to major changes in the inflation environment in order to ensure price stability over the medium term. These changes include geopolitical and economic fragmentation, the increasing use of artificial intelligence, demographic change and the threat to environmental sustainability. These factors are leading to an uncertain and potentially more volatile inflation environment that could entail larger deviations from the ECB’s symmetric 2 % inflation target.

Core elements of the updated strategy

ECB President Christine Lagarde stressed that the assessment “was a valuable opportunity to challenge our thinking, check our policy toolkit and fine-tune our strategy” in order to adapt it to current challenges. 

The main elements of the updated strategy include:

Symmetric 2 % inflation target: The ECB remains committed to its target inflation rate of 2 % over the medium term. It emphasises the symmetry of the objective, which implies an equally forceful response to both upward and downward deviations from target.

The medium-term orientation allows for a flexible monetary policy response that is appropriate to the circumstances. The anchoring of inflation expectations remains a key aspect in operationalising the medium-term orientation. The symmetric 2 % inflation target and the Harmonised Index of Consumer Prices (HICP) as an indicator with which to quantify price stability were assessed by the ECB Governing Council as having served well and were thus omitted from the review.

In this context, the ECB stresses the decisive importance of appropriately forceful or persistent monetary policy action in response to large, sustained deviations of inflation from the target – in either direction. This is in order to help prevent inflation expectations from becoming de-anchored and to safeguard price stability over the long term.

Flexibility and agility: The ECB has retained its currently available set of monetary policy instruments, such as key interest rates, open market operations, minimum reserve policy and the asset purchase programmes. Their use will continue to be subject to a comprehensive proportionality assessment. Their choice, design and implementation will be sufficiently flexible to enable an agile response by the ECB to changes in the inflation environment.

Taking into account uncertainties and risks: In monetary policy decisions the Governing Council takes into account not only the path for inflation and the economy but also surrounding risks and uncertainty. Scenarios and sensitivity analyses are intended to play an important role here.