After the surge in inflation in 2021-2023, the return to price stability and a more challenging global environment have altered the monetary picture and present the ECB with new questions. In this paper, we discuss three of them: how to define an ‘equilibrium’ monetary stance; how to deal with divergent national inflation rates; and how to navigate the forces shaping global exchange rates, in particular the euro’s. We assess the current ECB monetary stance to be broadly adequate, but we see challenges both in the persistence of cross-country inflation rate differences and in the appreciation of the euro.
This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 3 December 2025.
About the Authors:
Dr. Cinzia Alcidi is Senior Research Fellow at the Centre for European Policy Studies (CEPS) in Brussels, where she is also head of the Economic Policy Unit and the Jobs and Skills Units.
Cedric Tille is professor of economics at the Geneva Graduate Institute of International and Development Studies.
Ignazio Angeloni is a senior fellow at the Leibniz Institute for Financial Research SAFE and a part-time professor at the Robert Schuman Centre for Advanced Studies at the European University Institute in Florence.