Editing European Central Bank (section)

==== Critics regarding the new monetary policy ====
Criticism first emerged regarding the methodologies used for inflation estimation and their failure to anticipate the inflation surge. A primary critique focused on the inadequacy of traditional tools like the Phillips Curve, which examines the relationship between inflation and certain economic activity indicators, for accurately forecasting inflation.<ref name=":1" /><ref name=":6">{{Cite journal |last1=Baba |first1=Chikako |last2=Duval |first2=Romain |last3=Lan |first3=Ting |last4=Topalova |first4=Petia |date=2024-01-11 |title=The 2021-22 inflation surge in Europe: a Phillips-curve-based dissection |url=https://www.tandfonline.com/doi/full/10.1080/13504851.2024.2303383 |journal=Applied Economics Letters |language=en |pages=1–6 |doi=10.1080/13504851.2024.2303383 |issn=1350-4851}}</ref> During the 1970s, the Phillips Curve also faced significant criticism for its inability to accurately predict the inflation experienced in that decade. This period marked a critical reassessment of the curve's predictive capacity, particularly in the context of the economic phenomena of the time.<ref>{{Cite journal |last1=Atkeson |first1=Andrew |last2=Ohanian |first2=Lee E. |date=December 2001 |title=Are Phillips Curves Useful for Forecasting Inflation? |url=http://dx.doi.org/10.21034/qr.2511 |journal=Quarterly Review |volume=25 |issue=1 |doi=10.21034/qr.2511 |issn=0271-5287}}</ref> Traditional indicators used for forecasting economic dynamics, such as the output and unemployment gaps, were found to be inadequate in signaling the overheating of the economy and the prevailing tight labor market conditions.<ref name=":1" /><ref name=":6" /><ref>{{Cite journal |last=Lavoie |first=Marc |date=2024-01-05 |title=Conflictual Inflation and the Phillips Curve |url=https://www.tandfonline.com/doi/full/10.1080/09538259.2023.2294305 |journal=Review of Political Economy |volume=36 |issue=4 |language=en |pages=1397–1419 |doi=10.1080/09538259.2023.2294305 |s2cid=266796071 |issn=0953-8259}}</ref> Moreover, the important belief among central banks that sustained inflationary increases are a consequence of unanchored long-term inflation expectations was challenged during 2021–2022. During this period, inflation expectations remained relatively stable, leading to the misinterpretations by the European Central Bank and other monetary authorities regarding the inflationary trend's nature.<ref name=":1" /> Both the FED and the ECB argued that the rise in inflation was only temporary and was the sole result of post-pandemic supply disruptions on a few selected goods and services (food and energy). The FED and the ECB then maintained their expansionary monetary policy, keeping interest rates low.<ref name=":3" />

Some critics have also emerged saying that it was complicated for independent central banks, including the ECB, to accurately assess during a synchronized policy rate hike the potential spillovers of cross-countries monetary policy on the inflation. This might lead to excessive monetary tightening (higher interest rates) in unusual circumstances.<ref name=":2" />

Concerns have also been raised about the European Central Bank's effectiveness in addressing the recent surge in energy prices.<ref name=":4">{{Cite journal |last1=Ider |first1=Gökhan |last2=Kriwoluzky |first2=Alexander |last3=Kurcz |first3=Frederik |last4=Schumann |first4=Ben |date=2023 |title=The Energy-Price Channel of (European) Monetary Policy |url=https://ideas.repec.org//p/zbw/vfsc23/277710.html |journal=VFS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" |language=en}}</ref> Some experts suggest that the eurozone should be viewed as a small open economy, implying that changes in its demand may not significantly impact global prices. Moreover, they argue that monetary policy might have minimal influence on the global demand for energy. This is because household demand for essentials like heating and transportation is believed to be relatively insensitive to price changes.<ref name=":4" /> Additionally, while a stronger euro could theoretically lead to lower import prices, it's uncertain whether these savings would be effectively passed on to consumers.

However, recent studies contradict these views by highlighting the significant role of energy prices in the transmission of monetary policy within the eurozone. An increase in the ECB's policy rates tends to appreciate the euro against the dollar. This appreciation can lead to higher local energy costs but may also reduce demand, potentially lowering global energy prices. These studies support the ECB's decision to follow the Federal Reserve's lead in raising policy rates, which appears to have been a strategic move to curb imported inflation and address the spike in energy prices.<ref name=":4" />