ECB’s Stournaras Says Price Stability Must Remain Firm Core of Evolving Central Bank Mandates

18 November 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Tuesday said central banks must keep price stability at the heart of their mandates even as they adapt to structural changes, arguing that credibility built over decades remains essential to navigating shocks.

Stournaras, who is governor of the Bank of Greece, wrote in an article for International Banker that the evolution of central bank mandates over time reflected hard-learned lessons, beginning with the failures of the 1970s. Monetary policy mattered “a great deal,” he said, and independence was indispensable for anchoring expectations.

He said the move to price stability mandates and independent institutions followed the Great Inflation era and had delivered durable credibility. The post-pandemic inflation surge reaffirmed the value of autonomy, he said.

According to Stournaras, mandates broadened after the Global Financial Crisis and the euro area’s Sovereign Debt Crisis, with many central banks assuming macroprudential roles. He called this an important pillar supporting monetary stability.

Turning to the ECB, he stressed that the Treaty on the Functioning of the European Union made price stability the institution’s primary objective. The 2% symmetric inflation target and the medium-term orientation remained appropriate following the Eurosystem’s 2025 strategy assessment, he said.

The updated framework clarified how uncertainty is incorporated into decisions, including through scenario analysis and a strengthened three-element reaction function covering the inflation outlook, underlying inflation, and transmission strength. An explicit risk component has been added, he noted.

Stournaras said the experience of 2022–24 underscored the need for forceful and then persistent tightening when inflation deviates significantly from target. The ECB’s toolkit remained broad, he said, with policy rates as the primary instrument.

He argued that the Eurosystem operates in a complex environment shaped by geopolitical tensions, capital-market fragmentation, climate risks, digitalization, and competitiveness challenges. Monetary policy alone could not resolve these issues, he said, though it provides the stability necessary for investment.

Stournaras said further European-level integration was needed to support monetary-policy effectiveness. Completing the Banking Union and creating a fully-fledged Savings and Investments Union would improve the allocation of capital and help meet Europe’s green, digital, infrastructure, and defense needs, he said.

He linked deeper integration to strengthening the euro’s international role but said the absence of a genuine fiscal counterpart for the ECB remained a major structural limitation. A euro area fiscal capacity and a European safe asset would be “a true turning point,” he said.

He added that reducing internal market fragmentation, as highlighted in recent analytical work, would raise investment returns and help close productivity gaps with global peers.

Stournaras concluded that mandates would continue to evolve, but that the foundation had to remain a credible commitment to price stability. A more integrated and agile euro area institutional framework would amplify the effectiveness of monetary policy and support growth and convergence, he said.