(Bloomberg) -- The European Central Bank’s monetary-policy strategy review will focus on what happens to the economy after the pandemic and what officials can learn for policymaking, according to Chief Economist Philip Lane.
“Our 2025 assessment will consist of two broad strands: economic developments since the pandemic; and the implications for monetary policy,” he said in a speech on Monday in Luxembourg — confirming an earlier Bloomberg report.
Lane again stressed that the ECB will maintain its symmetric 2% inflation target “which has been essential in re-anchoring inflation expectations coming out of the low-inflation period and in keeping inflation expectations well anchored at target during the inflation surge period.”
The ECB has embarked on a fresh review – following the one that ended in 2021 – and wants to present the results in the second half of 2025. While the exercise will be shorter and less wide-ranging this time around, it could still have significant implications.
“We will assess the cyclical and structural factors shaping the inflation and economic environment in the light of the recent inflation experience,” Lane said. The ECB will also look “at the possible enhancements of the existing analytical toolkit, including forecasting techniques.”
Officials will assess the policy implications of the new inflation environment, he said. “This will include reviewing the lessons learned from the low- and high-inflation periods and our experiences with the evolving roles of the instruments in the policy toolkit over the monetary-policy cycle.”
Some officials want a discussion about the costs and benefits of large-scale asset purchases, known as quantitative easing. Though most deem the tool efficient during crises, some see downsides and want to deploy it more selectively if needed in the future.
“We will furthermore examine the operationalisation of the medium-term orientation of the monetary-policy strategy, with a focus on the ECB’s reaction function to both upside and downside threats to the anchoring of inflation expectations to the target,” Lane said.
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