What Is the European Central Bank Supposed to Do?

In July 2021, the European Central Bank (ECB) published a new monetary policy strategy, the first time in 17 years that it had undertaken a review of its monetary policy. In the intervening time, the world – and the economic challenges facing the ECB – have changed immensely but partly as a result of the ECB’s own maneuvering. In particular, monetary policy has been relied upon for every single malaise facing the global economy, including and up to the coronavirus pandemic. This paper argues that a review of central banks as an institutional mechanism in general, and in particular the ECB, was overdue but should not have been limited to policies; instead, an opportunity was missed to have an institutional review to examine whether or not it has been performing as intended. In particular, the vast experiment of unconventional monetary policy/issuance should have been more scrutinized from an institutional level as it appears to have contributed to the current problems the European economy faces. Europe and the ECB would be well served by taking stock of its actions over the past two decades and especially during the era of unconventional monetary policy to find a sustainable route forward.