Changes from report parliamentary committee draft to plenary report

The use of these nonstandard measures has been reviewed carefully in the ECB’s recent strategy assessment, taking into account not only the lessons from the low-inflation period but also from the post-pandemic inflation surge. In my view, this assessment confirmed the importance of having a diverse and flexible toolkit. In case of large, sustained deviations of inflation from target, be it above or below the target, it is essential that appropriately forceful or persistent monetary policy action is taken to prevent de-anchoring of inflation expectations. While policy rates are the first line of response, at times other measures may need to be invoked to ensure price stability in the medium term. These instruments therefore should remain part of the ECB toolkit.

That said, the use of nonstandard measures must always be proportionate, given their potentially larger side effects compared with standard rate policy. This is why the ECB applies a comprehensive proportionality assessment, which implies assessing the benefits and the potential side effects of monetary policy measures, their interaction and their balance over time. I fully support this approach, as it safeguards the effectiveness of monetary policy while ensuring that tools are deployed in a measured and responsible manner.

Transparency and accountability are essential complements to this flexibility. The ECB has made significant efforts to explain the design and parameters of its programmes, publishing extensive analyses of their modalities and effectiveness, and ensuring public access to detailed information on its balance sheet. At the same time, some operational elements cannot be disclosed without undermining the effectiveness of the tools themselves. Maintaining this balance – between openness and protecting the integrity of monetary policy – is important. Ultimately, what matters most is that the ECB remains fully accountable to the European Parliament and the public at large, while preserving the independence needed to fulfil its mandate.

11. The ECB places increasing emphasis on communication as a policy tool. How much uncertainty should a central bank explicitly communicate without undermining credibility or accountability?

Uncertainty has been unusually elevated in recent years, reflecting the pandemic, the inflation surge and ongoing geopolitical tensions. The 2025 strategy assessment recognises that ongoing structural shifts related to geopolitics, digitalisation, artificial intelligence, demography, the threat to environmental sustainability and changes in the international financial system. These shifts suggest that the inflation environment will remain uncertain and potentially more volatile. This can result in larger target deviations in both directions, posing challenges for the conduct of monetary policy. In recognition of structurally elevated uncertainty, the ECB takes into account not only the most likely path for inflation and the economy but also surrounding risks and uncertainty, including through the appropriate use of scenario and sensitivity analyses.

This is also why the ECB has shifted towards a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. Interest rate decisions are based in particular on the assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission.

In my view, communicating uncertainty explicitly is an essential part of modern central banking. Since both inflation persistence and the strength of monetary transmission are first order influences on the calibration of the rate path, the prominence given to these factors in ECB communication have helped market participants to understand our reaction function. As a result, the ECB’s credibility and effectiveness have not suffered from the uncertain environment.

Finally, communication of uncertainty is also integral to accountability. The ECB needs to communicate not only the outcome of its deliberations but also the factors it has taken into account coming to its decisions, including its risk assessment. Transparency and accountability therefore go together and reinforce each other.

12. Geopolitical and trade developments increasingly impact inflation dynamics. How should the ECB factor in these developments in its monetary policy decisions?

Geopolitical tensions and disruptions to international trade can be major sources of economic shocks and uncertainty, with considerable implications for the economy and price stability. For this reason, the ECB closely and continuously monitors global geopolitical developments, trade, and the channels through which they affect the euro area economy and inflation. Eurosystem staff projections incorporate the most likely path for the global economy based on well-defined assumptions, including marketbased expectations for interest rates and for energy prices such as oil and gas. Effective tariff rates in place at the time of the projection cutoff are also taken into account.

Given the complexity and unpredictability of today’s geopolitical environment, it is essential to also monitor and assess the uncertainty and risks surrounding the baseline projections that it induces. The ECB increasingly complements its baseline projections with risk assessments, sensitivity analyses and scenario analyses. For example, recent projection exercises have included dedicated assessments of the potential impact of shifts in US tariff policy and of heightened geopolitical tensions in the Middle East. These tools are essential for understanding not only the expected central path of the economy but also the range of plausible alternative outcomes – an important consideration for calibrating monetary policy in periods of elevated uncertainty.

Geopolitical and trade developments can also affect financial stability, including through commodity markets, global risk sentiment and crossborder financial flows. The ECB regularly evaluates these risks, including in its Financial Stability Review, to ensure that monetary policy decisions are informed by a broad assessment of the macrofinancial environment.

In my view, this combination of close monitoring, structured risk assessment and scenario analysis allows the ECB to factor geopolitical and trade developments into its monetary policy decisions in a transparent, consistent and forwardlooking manner. As uncertainty in the global economy may remain elevated for some time, maintaining this comprehensive approach will be crucial for safeguarding price stability in the euro area.

13. Climate change and nature related risks might have an impact on inflation dynamics and economic uncertainty. How do you assess the role currently assigned to those risks in the ECB's monetary policy analysis and decision making and how should the ECB incorporate them in its toolkit? Should the ECB review its price stability monitoring framework to better take into consideration these risks? How do you balance responses with the principle of ‘market neutrality’?

Climate change and nature degradation are shaping the economic environment in which monetary policy operates. More frequent and extreme climate events can result in a combination of supply and demand shocks, affecting output and increase inflation volatility and uncertainty. Over a longer horizon, increased physical risks may also have structural effects on long-run growth and long-run interest rates. In my view, the ECB has made important progress in incorporating these risks into its monetary policy analysis, but the evolving nature of climate change requires continued reviewing of this work.

Beyond monetary policy analysis, the ECB has also acted to incorporate these risks into our monetary policy implementation toolkit. The Eurosystem tilting framework played a meaningful part in mitigating risks and reducing emissions associated with corporate bond monetary policy portfolios. Since 2023, the ECB and Eurosystem NCBs publish annually climate-related financial disclosures on monetary and non-monetary policy portfolios which since the last edition incorporate a new indicator on nature-related dependencies. Interim decarbonisation targets were introduced in 2025 to monitor the emission reduction trajectory of corporate bond portfolios on a path that supports the goals of the Paris Agreement. More recently, the ECB decided to adapt its collateral framework by introducing a climate factor which will address forward-looking climate-related uncertainties, enhancing the resilience of monetary policy implementation. Finally, the design of the operational framework will aim at incorporating climate change-related considerations into the structural monetary policy operations.

While it is the primary responsibility of governments to take appropriate action for dealing with climate change, the ECB, within its mandate, takes into account the implications of climate change and nature degradation for monetary policy and central banking. Tools that the ECB uses in this context include a model-based approach to analysing the transmission of decarbonisation strategies, such as carbon taxes, the EU Emissions Trading System (EU ETS) and policy mix scenarios to inform the macroeconomic projections and employed as scenarios around the projection baseline. These efforts help ensure that monetary policy decisions are informed by a better understanding of how climate developments shape inflation dynamics and transmission. As climate shocks are likely to become more frequent, I believe it will remain important to reflect such risks in the scenario analyses.

As regards market neutrality, this is an operational tool rather than a legal requirement. Market neutrality can help ensure that the ECB’s interventions in the market comply with the open market economy principle. However, the ECB can justifiably depart from the market neutrality principle in order to achieve its objectives and comply with Treaty principles. The existence of climate externalities requires reconsidering the notion of market neutrality. This for instance has been the case when the ECB tilted purchases in the Corporate Sector Purchase Programme towards issuers with a better climate performance.

14. What are your views on the current level of coordination between the main central banks on international level? How do you see attacks on central bank independence in third countries changing this?

The major central banks cooperate today within a dense and welltested network of international fora, ranging from the Bank for International Settlements, the Financial Stability Board and the IMF, to more specialised groups focusing on payments, financial stability and regulatory standards. This cooperation has repeatedly proven its value during periods of global stress, as we saw during the global financial crisis, and, more recently, the pandemic and the energy price shock following Russia’s invasion of Ukraine. While each central bank ultimately takes decisions in line with its domestic mandate and institutional framework, there is a common understanding that transparent communication, regular exchange, sharing of analysis and – where appropriate – joint policy actions can help avoid negative spillovers and contribute to global monetary and financial stability.

Attacks on central bank independence in third countries are therefore a cause for concern. When monetary policy becomes subject to shortterm political pressures – whether to accommodate fiscal needs or to keep interest rates artificially low – credibility suffers, inflation expectations risk becoming unanchored, and financial markets may demand a higher risk premium.

In this environment, the response, in my view, must be to reaffirm and exemplify the benefits of independent central banks. In this respect, I fully support the joint statement issued by ECB President Lagarde, on behalf of the Governing Council, and other international central bankers on 13 January 2026. At the same time, the ECB has a strong interest to uphold institutions and fora that promote macroeconomic and financial stability and needs to play its part to keep them well-functioning and strong. Maintaining steady and constructive working relationships with all central bank counterparts remains essential to preserving a stable global financial system – even in an environment where political pressures may differ across jurisdictions.

15. The ECB’s collateral framework does not rely mechanically on external credit ratings and involves a significant degree of internal judgement. How should accountability for these risk-management choices be ensured, particularly in light of their potential economic, distributional and political consequences?

Collateral requirements are an important pillar of any of the ECB’s credit operations to protect the ECB from the financial risk associated with these operations. Article 18.1 of the ESCB and ECB Statute mandates that lending to banks through refinancing operations can only be provided against adequate collateral. To ensure that collateral is adequate, the Eurosystem applies eligibility criteria that include a well-established credit assessment framework, which draws on multiple sources of information and incorporates internal judgment, which is essential as mechanical reliance on external credit ratings – especially for sovereign bonds – can jeopardise the smooth implementation of monetary policy and risk triggering sharp “cliff effects”.

In practice, Governing Council discretion can apply after a deep weighing of trade-offs between policy (e.g. ensuring collateral sufficiency in accordance with prevailing monetary policy stance) and risk management considerations.

As part of the ECB measures related to the Global Financial Crisis, the subsequent euro area sovereign crisis and more recently the pandemic crisis, temporary discretionary measures in the form of country-specific waivers were introduced. They were linked to the existence of a financial assistance programme entailing conditionality, among other things, on the achievement of fiscal targets, and also linked to market functioning and risk management considerations. At the same time, when the continued acceptance of certain sovereign bonds was considered to violate its statutory obligation to accept only adequate collateral, those assets were no longer accepted.

For each temporary deviation, the ECB was transparent and explained its decisions to EU citizens and their elected representatives, the Members of the European Parliament, in line with the accountability architecture. Moreover, given the key role of sovereign ratings in the financial system and in its collateral framework, the Eurosystem regularly conducts in-depth due diligence of all ratings provided by accepted rating agencies.

In my view, the current framework strikes a good balance: it ensures robust risk management while allowing the ECB sufficient flexibility to safeguard monetary policy transmission in exceptional situations.

16. The ECB has emphasised a ‘meeting-by-meeting’ approach to monetary policy decisions. What are your views on the usefulness of forward guidance as a monetary policy tool?

As monetary policy operates in an increasingly uncertain and changing economic environment, the way we communicate our current and future actions is also being adapted accordingly. The European Central Bank introduced forward guidance in 2013, amid a low-inflation (and near-zero policy rate) environment, as a tool to signal that rates would stay low for an extended period to support growth and inflation. When one-sided, persistent shocks push the economy toward the effective lower bound, forward guidance can indeed reinforce confidence that policy will remain sufficiently accommodative to offset these pressures. But the effectiveness of forward guidance diminishes when the central bank faces two-sided risks and uncertainty about the persistence of inflationary shocks is elevated, as the probability of a delayed policy lift-off can rise quickly under such conditions. In the latter environment such precommitment can be overly constraining for the central bank and therefore prove counterproductive. In such an environment, central banks need the flexibility to act based on available data, taking into account a fast-changing environment and adopting a meeting-by-meeting approach.

The inflation surge demonstrated that forecasting inflation during periods of large and numerous shocks is inherently difficult. A case in point is the immediate post-Covid phase. As forecast errors widened and heightened uncertainty prompted frequent revisions of the outlook, the ECB adopted a "meeting-by-meeting" approach in July 2022, emphasising the role of incoming data in informing monetary policy decisions. Importantly, this framework does not imply a backward-looking orientation; the focus remains firmly on the medium term. Nor should data dependence be confused with data-point dependence, given that the underlying state of the economy reflects the interplay of numerous factors. Although rate forward guidance was suspended during this period owing to rapidly changing circumstances and exceptional uncertainty, the ECB continued to provide transparency regarding its decision-making process. In March 2023, it clarified its reaction function through a three-element framework: the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission. Following the 2025 strategy assessment, risks surrounding the outlook were formally incorporated to underscore the role of uncertainty in policy formulation. The meeting-by-meeting, data-dependent approach has served us well in bringing inflation back to target by allowing us to react quickly to a fast-changing environment and maintain full optionality in our decisions on rate changes.

To conclude, the selection, design, and deployment of policy instruments should account for continuously evolving macroeconomic conditions while preserving the flexibility needed to respond promptly to new shocks.

17. Given persistent cross-country differences in inflation dynamics within the euro area, how should the ECB interpret inflation dispersion when calibrating policy, and do you see future euro area enlargement as adding meaningful complexity to maintaining a coherent single monetary stance?

The European Central Bank's monetary policy is focused on the euro area as a whole, rather than individual member states. This area-wide orientation reflects both the institutional framework of the monetary union and the practical constraints of operating a single monetary policy across diverse economies. Some degree of heterogeneity across countries is therefore not only inevitable but also acceptable within this framework, particularly when they arise from convergence dynamics within the union. Importantly, the evidence does not suggest that cross-country heterogeneity of inflation or business cycle fluctuations dynamics has reached levels that would make the common currency unsuitable for any member state, or that would generate fundamental tensions among countries regarding the appropriate stance of monetary policy.

Regarding the relevance of asymmetric shocks associated with euro area enlargement, internal analyses conducted by the HNB indicate that new member states have generally been well integrated into the euro area economy prior to adoption, with business cycles that are closely aligned with those of existing euro area members. Furthermore, monetary policy and exchange rate arrangements prior to euro adoption, such as currency board regimes or tightly managed floats, further emphasize that new entrants are natural members of the single currency area. For these newer members, the relative importance of symmetric euro area-wide shocks, which should align business cycles and inflation developments across countries, is substantial, increasing over time, and broadly comparable to that observed in other small member states. This pattern is consistent with the endogeneity hypothesis of Optimum Currency Area theory, which posits that relative importance of symmetric shocks may increase after a country adopts the common currency. The underlying mechanism is that monetary integration tends to enhance trade linkages and promote cross-border investment flows, thereby deepening economic links over time. It is also worth noting that recent new members, including Bulgaria and Croatia as most recent members, are relatively small economies with limited influence on the area-wide aggregates that guide monetary policy decisions.

Notwithstanding these general developments, inflation differentials across euro area countries have exhibited some notable variation in recent years. These differentials were particularly pronounced at the peak of the recent inflationary episode, driven primarily by divergences in energy, but also food and services inflation. More recently, however, these differentials have largely normalised, suggesting that much of the observed divergence was cyclical in nature and that business cycle coherence remains important factor in determining inflation outcomes across the area. Cyclical economic performance also plays a role: Croatia, Slovakia or Spain, for example, have recorded above-average inflation alongside above-average GDP growth over the recent period. Current inflation differentials remain somewhat above historical averages, suggesting that some structural differences across countries may also have a role – for example, differences in labour market conditions, varying degrees of exposure to Russian energy supplies (as observed in the Baltic states, for instance) or differences in sectoral composition across economies.

Inflation differentials are not inherently problematic within a monetary union, provided they remain moderate in magnitude. Indeed, such differentials are to be expected when they arise from temporary adjustments to economic shocks or from the natural process of real convergence across member states. However, large and persistent divergences in inflation would be a concern, as they may impede the uniform transmission of monetary policy across the area. A substantial fiscal expansion in a particular country, for example, could generate domestic price pressures that the single monetary policy cannot directly address. Similarly, sustained differences in underlying cost dynamics or the presence of structural rigidities may give rise to more persistent divergences in inflation trajectories.

For these reasons, inflation differentials warrant ongoing monitoring and analysis. Nevertheless, it must be acknowledged that the scope for monetary policy to directly address cross-country inflation divergences remains limited. The primary responsibility for managing country-specific developments rests with country policies, which must complement the area-wide orientation of the ECB's monetary policy stance.

18. Europe faces structurally weak productivity growth. How can the ECB contribute to a macroeconomic environment supportive of investment and capital formation without overstepping its mandate?

The ECB’s primary objective is price stability in the euro area. Stable prices are a prerequisite for economic and financial stability, which in turn are essential for an environment conducive to long-term investment and economic prosperity.

High inflation erodes wealth, labour income and the real return on capital, thereby discouraging consumption and investment spending by households and firms. Too-low inflation, on the other hand, can be a sign of a sluggish economy and thereby also harm investment incentives. Price stability reduces this uncertainty about future purchasing power, helping firms and households to take longer-horizon decisions on investment and consumption. Stable prices also support an efficient allocation of resources by allowing relative price signals to operate more clearly and by preventing the distortions associated with high or volatile inflation.

Without prejudice to its price stability objective, the ECB shall support the general economic policies in the European Union with a view to contributing to the achievement of the Union’s objectives as laid down in Article 3 of the Treaty on the Functioning of the European Union. Within its mandate, the ECB can thus support EU initiatives aimed at fostering investment, for instance by sharing its expertise on financial markets and their integration. The ECB does so regularly in its publications, and in meetings with other European institutions and Member States in the context of the EU fora.

The ECB also closely monitors productivity developments in the context of its economic analysis. This is particularly important at the current juncture since recent technological advances related to digitalisation and artificial intelligence have the potential to support productivity and increase the importance of intangible capital – as well as high-skilled labour and associated wages – relative to tangible capital.

C. Financial stability and supervision

19. What do you find the most important challenges in the field of financial stability in the euro area? How could the ECB support more effectively the fight against these challenges?

Financial stability risks in the euro area today stem from the combination of high uncertainty and underlying structural vulnerabilities.

First, geopolitical tensions and growing geoeconomic fragmentation are the key sources of risk, as they can weigh on future growth, increase market volatility and tighten financing conditions.

Second, fiscal challenges in some Member States remain key concern. Elevated debt levels, anticipated increases in defence, infrastructure, and social spending, coupled with limited fiscal space, could test investor confidence and exert upward pressure on sovereign funding costs. Given the strong links between sovereigns, banks, and the real economy, these vulnerabilities could generate adverse feedback loops if triggered simultaneously.

Third, financial markets are vulnerable to sharp corrections. Despite elevated geopolitical and policy uncertainty, risk appetite has remained strong and asset valuations (especially in equity

markets) look stretched and increasingly concentrated, particularly around AI-related firms. This creates the risk of sudden market corrections, which could be amplified by the NBFI sector given their liquidity mismatches and leverage. Developments in the US private credit market and the highly capital-intensive nature of the AI boom also point to risks related to opacity, weakening underwriting standards, and tighter links between banks and non-banks. If AIrelated expectations were to disappoint, a sharp correction in US markets could spill over to the euro area through cross-border exposures, market channels, and bank–NBFI linkages. To meet margin calls or maintain liquidity, NBFIs with significant US market exposures may draw on bank-provided credit lines or liquidate assets, putting stress on banks’ balance sheets through increased credit risk, higher funding demand, and potential mark-to-market losses. In addition, credit spreads remain compressed, reflecting still low risk premia on both sovereign and corporate debt, which could amplify vulnerabilities in highly indebted economies or sectors if market conditions shift.

On top of cyclical risks, several structural challenges for financial stability include cyber risks, climate-related physical and transition risks, demographic pressures and implications of digitalisation and technological innovations, such as AI.

The ECB can address these challenges most effectively by strengthening resilience of the financial sector through its analytical, supervisory and macroprudential roles. ECB provides comprehensive risk analysis, producing timely assessments of risks and vulnerabilities that contribute to appropriate policy decisions. This involves closely monitoring risks in banking and beyond the banking sector and, within its mandate, activating supervisory measures and, when warranted, reinforcing national macroprudential measures to enhance the resilience of the euro area financial system in an increasingly uncertain global environment.

Close cooperation with other authorities, both at the EU and Member States level, is essential to ensure that emerging systemic risks are identified at an early stage and effectively mitigated, for example by the timely build up adequate buffers to absorb potential shocks. In this context, the European Systemic Risk Board (ESRB) plays a central role as the EU-wide platform that brings together all Member States and the European Supervisory Authorities (ESAs), to facilitate information sharing, risk assessment, and coordinated macroprudential responses. Through its active involvement in the ESRB, the ECB can further strengthen cooperation and coordination among authorities, promote the exchange of best practices and lessons learned, and help ensure that macroprudential instruments are applied in a timely, consistent, and effective manner across the European Union.

Finally, clear and consistent communication is equally important to reduce uncertainty, anchor market expectations and to explain the rationale behind policy actions. By providing opinions and recommendations on regulatory changes, the ECB helps to shape a framework that addresses structural vulnerabilities and reinforces financial stability across the euro area.

The key priority is thus to remain forward-looking. Because financial stability risks often emerge from complex interaction of structural weaknesses and cyclical shocks, the ECB's role is not only to react to stress but to build resilience in advance, ensuring that the euro area financial system continues to support sustainable growth in a highly uncertain global environment.

20. How do you see the priorities of the ECB in the implementation of the recommendations from the Draghi and Letta reports, including on Savings and Investments Union (SIU)? How can the ECB, within its mandate, actively support the development of a genuine SIU?

The Draghi and Letta reports offer milestone contributions to the European debate on deepening economic and financial integration in the EU and promoting financial stability, growth, competitiveness and resilience. While their scope is much broader, the reports include key recommendations also on banking and financial issues, namely the Banking Union and the Capital Markets Union, summarised under the header of Savings and Investments Union (SIU).

In my view, a fullyfledged SIU is urgently needed. Europe's competitiveness, its open strategic autonomy, and its ability to finance the green and digital transitions all depend on a deeper and better integrated capital market. Despite nearly a decade of discussion since the Commission’s first Capital Markets Union Action Plan in 2015, progress has been slow. The rapidly evolving geopolitical environment has only increased the urgency of mobilising European savings toward productive investments and reducing Europe’s structural reliance on nonEU financial infrastructures. From this perspective, the Commission’s recent initiatives - on securitisation, the Savings and Investment Accounts, supplementary pensions, and capital market integration and supervision – are very welcome.

The ECB has a strong interest – and an important role to play – in advancing the SIU: first, monetary policy transmission will benefit from a deeper integration of capital markets; second, the tasks of the ECB in ensuring a smooth functioning of the payment system and financial market infrastructure will benefit from the improvements that the Commission proposals will bring in these areas; third, ECB bank supervision functions will benefit from a stronger and more integrated supervisory architecture for capital markets, also in light of the strong interconnections between banks and capital market players.

Overall, I believe the ECB should remain an active and constructive contributor to the development of the SIU. Within its mandate, it can actively contribute to the discussions based on its competences and its technical expertise, with a view to support the technical work and the achievement of tangible progress as soon as possible. The ECB should in particular provide its expertise as regards the integration of EU’s post-trading infrastructures and the creation of an EU integrated system of capital markets supervision, having benefited from the experience of the SSM.