Inflation targeting and monetary policy in practice: the experience of the European Central Bank

Carlo Altavilla and Massimo Rostagno

Chapter 27 in Research Handbook on Inflation, 2025, pp 570-582 from Edward Elgar Publishing

Abstract: This chapter provides an overview of euro area monetary policy and its price stability mandate over the first 25 years following the establishment of the European Central Bank (ECB) in 1999. The first section revisits the institutional framework and the price stability mandate of the ECB. The second section delves into the initial decade following the establishment of the monetary union, predominantly characterized by upward inflationary shocks. The third section examines the subsequent decade, marked by a transition from inflationary to notably persistent disinflationary pressures. In this phase, a broader array of policy instruments was neededto effectively manage inflation expectations, diverging from conventional practices elsewhere. The fourth section outlines the sequence of adverse shocks that have affected inflation dynamics within the euro area since 2020, ranging from the pandemic-induced shock to episodes of very high inflation spurred by energy-related factors, reopening effects and associated supply-side constrictions. The final section offers concluding remarks.

Keywords: European Central Bank; Inflation targeting; Monetary policy; Unconventional monetary policy; Price stability (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035327751
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