The first twenty years of the European Central Bank: monetary policy

On 1 June 2018 the ECB celebrated its 20th anniversary. This paper provides a comprehensive view of the ECB's monetary policy over these two decades.

One of the main themes of the paper is how ECB monetary policy responded to the challenges posed by the European twin crises and the subsequent slow economic recovery, making use of its relatively wide range of instruments, defining new ones where necessary and developing the strategic underpinnings of its policy framework.

This paper reviews the European Central Bank's monetary policy during its first twenty years of existence. Overall, the ECB has delivered on its price stability mandate despite the very challenging crisis times of the last decade. Average inflation over this period has been 1.7 percent, which is in line with the ECB's aim of maintaining inflation below but close to 2 percent over the medium term. However, this average number masks quite stable inflation around 2 percent before the outbreak of the financial and sovereign debt crisis and a much more volatile and on average lower inflation rate around 1.5 percent thereafter. Throughout the whole twenty years, average five-year ahead inflation expectations, as captured by the Survey of Professional Forecasters, have remained stable within a narrow range between 1.8 and 2.0 percent, underlining the ECB's credibility.