In early 2020 the European Central Bank (ECB) launched a review of its monetary policy strategy. The review aims to ensure the suitability of the ECB’s monetary policy in the light of the global trends and developments over the 17 years since the strategy was originally defined. Looking at the role of monetary policy in the world today, the question at the heart of the review is how the ECB can best continue to implement its mandate to ensure stable prices for people across the euro area. Understanding the expectations, beliefs, confidence level, uncertainties, hopes and fears of individual households and businesses is vital for monetary policy to be effective. European citizens were therefore invited to share their views on price stability, economic issues, global challenges and public outreach with the ECB and the national central banks (NCBs) of the euro area. To include as many voices as possible, the review began with a listening and reflection phase. This listening exercise had the twofold aim of informing and enriching the review analysis with a wide range of perspectives and using it as an opportunity to engage with the wider public in a structured manner. This midterm report summarises the input received from the European public, as part of this listening phase, via multiple channels: a dedicated event for European-level civil society organisations, held in October 2020 (“ECB Listens” event); a web survey for the general public, running from February until October 2020 (ECB Listens Portal); and national-level events conducted by euro area national central banks (NCBs) between October and December 2020 (NCB listening events). It should be noted that findings are of a qualitative nature and not necessarily representative.
2 Key findings
The listening exercise collected people’s views and sparked discussions around four main themes: price stability, economic issues, global challenges and communications. Throughout the exercise, people responded to questions and shared their expectations of what a central bank should deliver in the context of wider socio-political challenges. Systemic issues that influence the work of a central bank, such as the long-term impact of the coronavirus pandemic on the economy, the effects of digitalisation on employment, the costs of climate change and possible future economic and financial crises, were mentioned prominently across all listening channels.
2.2 People’s perceptions of price stability, inflation and deflation
Many people associated a change in the general price level with a negative impact on their daily lives, typically exemplified through a decline in purchasing power and value of savings. While exacerbated inflation was not the primary concern, there was a common perception that prices have increased disproportionately. This was supported by people’s notion of rising expenses, specifically higher rental and mortgage payments, and more expensive groceries. The listening exercise demonstrated the significant effect of the cost of housing on people’s perceived levels of inflation. Many used this opportunity to urge the ECB to widen the scope of housing costs (including those of homeowners) that are considered when measuring inflation. However, some cautioned against including assets, such as real estate, in the basket of goods and services.
In this context, the ECB’s aim of keeping inflation “below, but close to, 2%” over the medium term was called into question by some. These people wondered if the ECB’s aim should not be closer to 0% for the euro to maintain its purchasing power in the future, or because they saw the persistent undershooting of the aim as proof of inadequate monetary policy measures. Some also criticised the extended period of low interest rates, which in their view was responsible for excessive government borrowing and unsustainable debt levels. Related to this criticism was a concern about the diminishing return on people’s savings, as a result of monetary policy.
However, there were also voices in support of the ECB’s definition of price stability and related monetary policy measures. These people pointed to various other factors that have had an impact on the effectiveness of monetary policy and called for other policy areas to support monetary policy.
2.3 Economic situation and the effects of global trends
There was a widespread belief that the overall economic situation has deteriorated over the past decade. People cited the fragility of our economic model, mounting global challenges and increased uncertainty as main causes. They were equally concerned about the future, and their outlook on their individual and societal economic wellbeing is rather bleak – pessimism which might be partly linked to the context in which the listening exercise was conducted.
Indeed, the long-term economic effects of the coronavirus (COVID-19) pandemic were among the most frequently mentioned concerns. These included fears of weaker economic growth, higher levels of national debt, a decline in demand, rising unemployment and job precariousness. Younger people were specifically concerned about deteriorating employment conditions and lower chances of finding suitable employment, coupled with a fear of looming economic and financial crises. In this context, many approved of the ECB’s support measures to the European economy during the pandemic, stressing their importance and the continued need for them during the economic recovery.
An additional source of economic stress concerned the expectation that wages and pensions would further deteriorate in the future. This was due to the perception that these forms of income were not keeping up with the general increase in prices, leading to a loss of purchasing power. People expressed their fear that they would be able to afford less in the future. Others voiced their concern that the ECB’s asset purchases were creating potential asset bubbles.
The impact of climate change on the economy represented, for many, another cause of economic concern. People said they were already experiencing the consequences of climate change in their daily lives and expected the costs to protect the environment to increase in the future. As such, costs were expected to arise as the impact of climate change on the economy and financial sector grew, including through the transition towards greener economic models and the preservation of the environment itself.
Some highlighted the uncertain impact of digitalisation on the economy and wondered if the European Union is adequately equipped for the digital economy. Pressing issues that were raised included: the regulation of artificial intelligence, investment in technology, distribution of economic gains created through technological advances and the effects of fintech disruptions on the labour market.
2.4 The ECB’s role in addressing pressing challenges
There was a vibrant debate about whether the scope of the ECB’s mandate should be broadened and its policy actions extended under its secondary objective to support the general economic policies of the European Union.
Non-governmental organisations, climate change organisations, consumer protection groups, youth representatives, think tanks and members of the public called on the ECB to better address wider societal and economic issues, such as promoting economic growth and employment and protecting the environment. Concrete proposals differed, depending on what people believed the appropriate role of a central bank to be: some said they would like to see the ECB foster greater economic cohesion across euro area countries; some wanted the ECB to abandon the market neutrality principle and to commit to buying only green assets, so promoting the European Green Deal; and some wanted the ECB to consider a direct way for its policies to have an impact on people, rather than through banks and financial institutions.
However, not everyone supported further expanding the ECB’s tasks and tools. The non-standard monetary policy measures taken since the 2008 financial crisis received a fair amount of criticism and were viewed by some as overstepping the ECB’s mandate. In this context, many cautioned against the ECB taking on additional responsibilities.
Others questioned the effectiveness and appropriateness of the ECB’s policy decisions in general. They also interpreted central bank independence as an obligation to keep to a narrow price stability mandate and to refrain from becoming involved in issues perceived to be other policymakers’ responsibility.
2.5 Central bank communication
The listening exercise demonstrated, once again, that central banks need to explain their role better and to use understandable language and relatable examples to engage with the wider public.
While many people stated outright they did not know what a central bank did, others demonstrated a high level of misperceptions by proposing the ECB should take action outside its area of competence, such as harmonising taxation within the European Union or fighting national corruption. In addition, monetary policy concepts such as price stability, inflation, interest rates and asset purchases were perceived as far removed from people’s daily lives. Explaining the relevance of these concepts for people’s wellbeing should be at the centre of central bank communication. This includes replacing complexity and jargon with simple and accessible language.
The reasons for this widespread lack of understanding were varied and included self-perceived inadequate levels of financial literacy. Suggestions for improvement included using social media to break down the complexity of monetary policy topics, as well as holding regular events with different stakeholders. In the same vein, some suggested following up the monetary policy press conference with an explainer video to elaborate on how the decisions taken affected the public at large.
Regarding the ECB’s accountability and transparency framework, some argued that more detailed reporting of Governing Council meetings could be helpful in demystifying the ECB’s decision-making process. Others suggested enhanced reporting of Executive Board Members’ diaries, for example, highlighting the time spent meeting representatives of the financial sector as opposed to representatives of other sectors.
However, some voiced caution about the approach “more is better” and pointed to the information overload created by central banks. They suggested reducing the amount of communication (such as speeches by Executive Board members) and instead identified a few core topics which should be communicated consistently across all channels. Others highlighted the role of the media to translate complex monetary policy concepts and called for the fostering of closer relationships with journalists.
2.6 Feedback and next steps
In addition to informing the strategy review, the listening exercise was also an opportunity to engage with the public at large. As such, there was widespread appreciation for this approach. People welcomed the opportunity to express their views, opinions and concerns freely, in their own language, to the ECB’s decision-makers. Furthermore, the ability to share views on wider societal topics, such as culture, education, family and employment, outside of traditionally expert discussions, was mentioned favourably and further encouraged.
In this connection, it is clear that the public expects this experience to be the start of a conversation, rather than a one-off consultation. At the same time, the public has expressed a strong interest in being kept informed of how the various elements of the listening exercise have been incorporated into the strategy review consultations and of their outcome.
Listening to the wider public yielded a rich array of insights on topics relevant to the strategy review. Among the most debated topics were the cost of housing, job precariousness, inequality and the impact of climate change. In addition, the exercise also helped the Eurosystem to further engage with the wider public, reach new audiences and establish new relationships that will provide the foundation for future listening and engagement. There is a clear expectation for the ECB to continue listening to and engaging with the wider public and civil society beyond the strategy review, and to act on the calls for a clearer explanation of monetary policy decisions, using simple language and relatable examples.
Executive summaries of the reports on the ECB Listens Portal, the “ECB Listens” event and the NCB listening events
Executive Summary – ECB Listens Portal
The ECB listened to the views and opinions of the wider public submitted via an online questionnaire from February to October 2020. The approximately 4,000 respondents answered questions on four topics relevant to the monetary policy strategy review: (1) price stability, (2) economic issues, (3) global challenges, and (4) central bank communication.
- An overwhelming majority stated that they expected higher prices to have a negative impact on different aspects of their lives. Most prominently, people associated rising prices with less spending power, with the perceived stagnation of wages and pensions. Higher prices would be most strongly felt in people’s expenses, such as purchasing or renting a home, or buying groceries. This was in line with a general observation that higher prices increased the cost of housing and decreased people’s ability to save.
- There was a strong sense among the respondents that their individual economic conditions had deteriorated over the past decade. There were significant fears for the future concerning the general economic conditions, inequality and, more especially, unemployment and job precariousness. The negative impact of climate change on the economy was mentioned frequently as a main concern.
- There was a broad spectrum of opinions on whether the ECB should take other considerations into account when taking monetary policy decisions. Many believed that the ECB should assume a more prominent role in promoting economic growth and employment, and in addressing inequality and climate change. A significant minority, however, believed the ECB should keep to a narrow price stability mandate and should not intervene in fields perceived to fall under the competency of other policymakers.
- While a sizeable share of respondents felt well informed about the ECB, many felt inadequately informed about the ECB’s role and policies. The complexity of central bank language and the frequent use of economic jargon, as well as a lack of engagement with the wider public, were reasons associated with being ill-informed. Suggestions for improvement included a clearer explanation of the importance of price stability and the motivations behind taking specific monetary policy decisions, using simple language and relatable examples. Other respondents called for more transparent communication.
The full report can be found here
Executive Summary – “ECB Listens” event
The “ECB Listens” event with European-level civil society organisations took place on 21 October 2020. Civil society organisations present at the event represented groups promoting the environment, sustainability, social welfare, business, religion, culture and transparency. The two-hour online event was split into two sessions, one focusing on monetary policy and communication, the other on global challenges.
The 22 civil society representatives highlighted a wide range of perspectives and experience of how ECB decisions affected the various societal groups they represent. The discussion focused on structural obstacles in the socio-economic system, a lack of affordable housing, the repercussions of the global health pandemic on jobs and growth, and the threats of climate change to the economy. Views diverged on a number of issues: while some urged the ECB to expand on its primary mandate, to abandon market neutrality and to apply the EU Taxonomy of Sustainable Investments, others cautioned against such action by citing possible side effects, such as excessive government debt, jeopardising central bank independence and distorting the picture by “greenwashing”.
Overall, participants welcomed this opportunity to express their views and stressed the importance of the ECB continuing to listen to the people of Europe.
The full report can be found here
Executive Summary – NCB listening events
NCBs across the euro area are organising listening events to collect input for the strategy review at the national level. In principle, the events are being hosted by the respective central bank governors and are aimed at local civil society organisations, although formats may vary, depending on national preferences. By the end of 2020, national listening events had already taken place in 12 countries, and the series will continue until the end of March 2021.
The most prominent topic so far has been the definition and measurement of price stability, in particular the composition of the basket of goods used to measure inflation, and some concerns have been expressed on the impact of consistently low interest rates on the economy. The significant increase in the importance of housing costs in many countries has also been raised, as has the issue of fluctuating energy prices. Another important issue of concern to civil society organisations across the Eurosystem is the impact of climate change and how the ECB should address this in its strategy review. In addition to environmental sustainability considerations, there have also been calls for the ECB to consider economic and social sustainability to the extent possible within its mandate. Such issues have often been linked to the impact of the pandemic and the asset purchases conducted by the ECB.
For more information on national events, please consult the overview on the ECB’s strategy review hub page.
© European Central Bank, 2021
Postal address 60640 Frankfurt am Main, Germany
Telephone +49 69 1344 0
All rights reserved. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged.
For specific terminology please refer to the ECB glossary (available in English only).
- In the drafting of this “Midterm review summary report”, only those NCB listening event reports made available to the ECB by 8 January 2021 were taken into account, namely reports by the Deutsche Bundesbank, Eesti Pank, Banco de España, Latvijas Banka, Central Bank of Malta, Oesterreichische Nationalbank, Banco de Portugal, Banka Slovenije, Národná banka Slovenska and Suomen Pankki. Further national listening events are planned for 2021.
- Article 127 of the Treaty on the Functioning of the European Union concerns the Eurosystem’s objectives and tasks. The primary objective is to “maintain price stability”. However, the Treaty further states that, “without prejudice to the objective of price stability”, the Eurosystem “shall support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union”. This means working for the sustainable development of Europe, with goals such as “balanced economic growth”, “full employment and social progress”, and “a high level of protection and improvement of the quality of the environment” generally understood as secondary objectives.