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The European Central Bank (ECB) is expected to reaffirm its expansive monetary policy strategies from the past decade in an ongoing strategy review, despite criticism over the inflation surge and financial losses that followed. This stance comes amid internal calls for greater introspection, according to several ECB policymakers.
Launched in March, the strategy review examines the effectiveness of the ECB’s unconventional monetary tools—such as quantitative easing (QE), negative interest rates, and forward guidance—which were deployed in response to successive economic shocks including the global financial crisis, the eurozone debt crisis, and the COVID-19 pandemic.
Discussions with insiders suggest that the ECB will largely stand by its previous policy framework, opting for only minor revisions to the strategy document last updated in 2021. The review is not expected to offer substantive criticism of the ECB’s delayed response to the inflationary spike that gripped the eurozone between 2021 and 2022.
“The ECB appears poised to retain its reference to the need for ‘especially forceful or persistent’ action—code for QE and ultra-loose monetary policy—when inflation and rates are exceptionally low,” sources familiar with the review stated, under condition of anonymity.
Some policymakers, including Belgian central bank governor Pierre Wunsch, have urged for the removal of this clause, while others, like Dutch governor Klaas Knot and ECB board member Isabel Schnabel, advocate for more restrained use of bond-buying programmes moving forward, citing cost concerns and long-term risks.
During a recent retreat in Porto (May 6–7), ECB staff presented early findings on the impact of the stimulus policies, concluding that while the measures had been broadly effective in preventing deflation and supporting economic recovery, future usage should be more targeted.
One area where consensus has begun to form is around “forward guidance”, which many agree was overused and ultimately contributed to the ECB’s delayed policy tightening during the inflation spike. The review will likely recommend limited and cautious use of such guidance going forward.
Despite some dissent over the review’s preliminary conclusions—which some policymakers view as insufficiently critical—the process has reportedly remained collegial, paving the way for broad approval of the revised document, expected by early summer.
The updated strategy is also expected to reiterate the ECB’s commitment to a “symmetric” 2% inflation target, emphasizing that both inflation undershoots and overshoots are equally undesirable. It will acknowledge the heightened uncertainty surrounding the global economic outlook, amid geopolitical tensions and lingering structural imbalances.
Notably, the ECB’s decade of expansive policies—especially QE—has left it and the eurozone’s 20 national central banks financially exposed. By creating large reserves to ward off deflation, the ECB now faces mounting losses as it pays interest (2.25%) on over €2.8 trillion in bank reserves.
While central banks are not mandated to generate profits, these losses have eroded potential dividend payouts to governments, invited institutional scrutiny, and raised concerns over public confidence in the central bank’s stewardship.
As regulatory and monetary authorities globally recalibrate their frameworks in response to past crises and present challenges, the ECB’s strategy review will be closely watched—not only for what it preserves but also for what it chooses to revise or omit.
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