Vítor Constâncio: Past and future of the European Central Bank monetary policy

Speech by Mr Vítor Constâncio, Vice-President of the European Central Bank, at the Conference on "Central Banks in Historical Perspective: What Changed After the Financial Crisis?", organised by the Central Bank of Malta, Valletta, 4 May 2018.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Ladies and Gentlemen,

It is a pleasure to be here today and participate in this celebratory event for the 50th anniversary of the Central Bank of Malta. In accordance with the conference theme, I would like to take this opportunity to adopt a historical perspective and offer some reflections on monetary policy in the euro area over the past two decades. I will start with a review of the ECB journey from 1999 to date, to highlight the evolution of the practice of monetary policy in the euro area over this period. I will then draw some lessons from this experience, both for economic thinking and monetary policy making.

The ECB journey

As you all know, the Treaty on the European Union defines the contours of monetary policy in the euro area. According to Article 127 of the Treaty, price stability is the primary objective of monetary policy in the euro area. It is only without prejudice to the objective of price stability that monetary policy can support the general economic policies in the Union. This high-level mandate enshrined in the Treaty is the cornerstone of all ECB decisions and has remained unchanged over its two decades of existence.

Within the boundaries of the Treaty, however, the practice of monetary policy in the euro area has undergone a process of transformation over time. While the transformation has often been gradual, four key phases can be clearly identified.