Editing European Central Bank (section)

==== Framing of the crisis ====
The new era of inflation prompted a significant shift in the European Central Bank's framing compared to its stance in the 2000s. Initially, from its inception until the [[2008 financial crisis]], the ECB's primary objective was price stability, adhering to strict institutional rules that minimized policy trade-offs with other goals beyond price stability.<ref>{{Cite book |last=Drazen |first=A |title=Political economy in macroeconomics |publisher=[[Princeton University Press]] |year=2002 |edition=New |language=English}}</ref><ref>{{Cite journal |last1=Braun |first1=Benjamin |last2=Carlo |first2=Donato Di |last3=Diessner |first3=Sebastian |date=2022 |title=Planning laissez-faire: Supranational central banking and structural reforms |journal=[[Zeitschrift für Politikwissenschaft]] |language=en |volume=32 |issue=3 |pages=707–716 |doi=10.1007/s41358-022-00322-6 |issn=1430-6387|doi-access=free }}</ref> This approach was rooted in the "Central Bank Independence template", advocating that central bank's limited role to price stability and its independence were optimal.<ref>{{Cite book |last=Issing & al |first=O. |title=Monetary policy in the euro area: Strategy and decision-making at the european central bank. |publisher=Cambridge University Press |year=2001}}</ref><ref name=":0" /><ref name=":5">{{Cite journal |last1=Hartmann |first1=Philipp |last2=Smets |first2=Frank |date=2018 |title=The European Central Bank's Monetary Policy during Its First 20 Years |url=https://www.jstor.org/stable/26743874 |journal=Brookings Papers on Economic Activity |volume=2018 |issue=2 |pages=1–118 |doi=10.1353/eca.2018.0026 |jstor=26743874 |s2cid=203324137 |issn=0007-2303}}</ref><ref>{{Cite book |last1=Howarth |first1=David |title=The European Central Bank : The New European Leviathan? |last2=Loedel |first2=Peter |publisher=Palgrave Macmillan |year=2005}}</ref>

However, the post-financial crisis landscape, especially during the [[European debt crisis|sovereign debt crisis]] of the 2010s and subsequent economic stagnation era, necessitated a substantial revision in the ECB's strategy.<ref name=":0" /><ref name=":5" /> The ECB moved away from its original Central Bank Independence template, leading to a blurring of its objective hierarchy. It adopted new strategies such as acting as a [[lender of last resort]] for the banking system and fostering growth through very low interest rates and extensive asset purchase programs, which were designed to help stabilizing specific market segments and in the end revive growth.<ref>{{Cite journal |last1=Rodríguez |first1=Carlos |last2=Carrasco |first2=Carlos A. |date=2016 |title=ECB policy responses between 2007 and 2014: A chronological analysis and an assessment of their effects |url=https://doiserbia.nb.rs/Article.aspx?ID=1452-595X1604455R |journal=Panoeconomicus |volume=63 |issue=4 |pages=455–473 |doi=10.2298/pan1604455r|doi-access=free }}</ref><ref>{{Cite journal |last1=Gabor |first1=Daniela |last2=Ban |first2=Cornel |date=2015-10-12 |title=Banking on Bonds: The New Links Between States and Markets |url=http://dx.doi.org/10.1111/jcms.12309 |journal=Journal of Common Market Studies |volume=54 |issue=3 |pages=617–635 |doi=10.1111/jcms.12309 |s2cid=153924047 |issn=0021-9886}}</ref><ref>{{Cite journal |last1=Johnson |first1=Juliet |last2=Arel-Bundock |first2=Vincent |last3=Portniaguine |first3=Vladislav |date=2019 |title=Adding rooms onto a house we love: Central banking after the global financial crisis |url=https://onlinelibrary.wiley.com/doi/10.1111/padm.12567 |journal=Public Administration |language=en |volume=97 |issue=3 |pages=546–560 |doi=10.1111/padm.12567 |s2cid=158391365 |issn=0033-3298}}</ref>

In 2021, the European Central Bank embraced a significant strategic pivot by adopting its Climate Action Plan along with a new monetary policy strategy.<ref>{{Cite journal |last=Deyris |first=Jérôme |date=2023-09-03 |title=Too green to be true? Forging a climate consensus at the European Central Bank |url=https://www.tandfonline.com/doi/full/10.1080/13563467.2022.2162869 |journal=New Political Economy |language=en |volume=28 |issue=5 |pages=713–730 |doi=10.1080/13563467.2022.2162869 |s2cid=249832219 |issn=1356-3467}}</ref> This shift aimed to institutionalize the ECB's evolving role, moving beyond the singular focus on price stability—a policy shaped largely by the aftermath of the European sovereign debt crisis. Instead, the ECB began acknowledging its multifaceted responsibilities, which now include maintaining financial stability, supporting economic growth, and addressing climate-related objectives.<ref name=":0" /> However, with the [[2021–2023 inflation|surging of inflation in 2021]], some wondered as to whether the European Central Bank would revert to its foundational role, predominantly focused on chasing the “inflation monsters”. The term “inflation monsters<nowiki>''</nowiki> echoes the 2010 video of the ECB where two young people are facing a blue inflation monster unleashing banknotes and threatening to wreck the economy.<ref name=":0" /> Nevertheless, ECB policymakers effectively drew connections between the Central Bank Independence (CBI) framework and the experiences of the stagflation era to rationalize their decision to increase interest rates, avoiding the need for a discourse on regime change. In doing so, they recognized the complex trade-offs inherent in balancing various macroeconomic objectives and the challenging decisions they had to face.<ref name=":0" />

It was with this new monetary strategy that the eurozone found itself facing rising [[2021–2023 inflation|inflation in 2021]].<ref name=":0" /> Recent studies stated that key debate among policymakers centered on whether this inflationary trend would be transitory or permanent. Paul Krugman argued that the current inflationary surge would prove to be transitory, whereas other economists such as Olivier Blanchard and Larry Summers had issued warnings regarding the possible persistence of this inflation.<ref>{{Cite news |last=Krugman |first=Paul |date=2021-12-16 |title=Opinion {{!}} The Year of Inflation Infamy |url=https://www.nytimes.com/2021/12/16/opinion/inflation-economy-2021.html |access-date=2024-01-19 |work=The New York Times |language=en-US |issn=0362-4331}}</ref> Initially, both the European Central Bank and the Federal Reserve misjudged the situation, assuming the inflation spike to be temporary and expecting a swift return to their inflation target. This misperception led to the ECB's initial inaction regarding its [[monetary policy]].<ref name=":1">{{Cite web |last=Storm |first=Servaas |title=In the Footsteps of Ptolemy: The 'Science of Monetary Policy' and the Inflation of 2021-2023 |url=https://www.ineteconomics.org/perspectives/blog/in-the-footsteps-of-ptolemy-the-science-of-monetary-policy-and-the-inflation-of-2021-2023 |access-date=2024-01-13 |website=Institute for New Economic Thinking |language=en}}</ref>