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The ECB's next challenge : monetary policymaking in an age of uncertainty
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2254-3899
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Spanish and international economic & financial outlook, 2025, Vol. 14, No. 4, pp. 5-11
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JONES, Erik, The ECB’s next challenge : monetary policymaking in an age of uncertainty, Spanish and international economic & financial outlook, 2025, Vol. 14, No. 4, pp. 5-11 - https://hdl.handle.net/1814/93068
Abstract
On 5 June 2025, the Governing Council of the European Central Bank lowered its main policy rates by 25 basis points, bringing the deposit facility rate down to 2%. While this move does not yet return rates to their estimated long-term neutral level—and may not be the final adjustment—it marks an important shift. Specifically, it brings to a close the ECB’s three-phase response to the inflation shock triggered by the COVID-19 pandemic and Russia’s full-scale invasion of Ukraine. Looking ahead, the Governing Council will place less emphasis on whether interest rates are exactly at the “right level” for long-term price stability. Instead, the focus will shift toward how and when to respond to new external developments. In this new phase, the ECB aims to remain flexible and responsive while continuing to uphold its credibility with markets and the public. This forward-looking approach was outlined in a strategy assessment published by the ECB on 30 June, drawing on lessons from recent years. Concern for the neutrality of monetary policy will have to wait for a more predictable economic and political climate.
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Published online: July 2025