Acting under uncertainty: The ECB’s shift toward discretionary monetary policy
Monetary policy
Fecha: julio 2026
Erik Jones
SEFO, Spanish and International Economic & Financial Outlook, V. 15 N.º 4 (July 2026)
The ECB’s 25 basis point rate rise on 11 June 2026 sets it apart from the Federal Reserve and the Bank of England, both of which held rates steady the following week despite acknowledging elevated inflation and resilient growth. The divergence reflects the central role of judgement in monetary policymaking under conditions of deep uncertainty, when a ceasefire can be announced the day after a Governing Council meeting and collapse shortly thereafter. The war in the Middle East has produced a classic stagflationary tension: energy and commodity shortages pushing up prices while uncertainty suppresses investment and consumption, with second-order effects on trading partners amplifying both dynamics. The Governing Council’s primary concern is not the current data but the risk that firms and households stop looking through temporary price rises and begin embedding higher inflation into wages, contracts, and business models, a de-anchoring that survey data would only confirm with a significant lag. The ECB’s experience during the 2020-2024 inflation disinflation cycle, when delayed action allowed inflation to exceed 10% before the tightening response, has raised the institutional premium on demonstrating a capacity to act early. Structural factors, including climate adaptation costs, AI investment, and demographic pressures pulling in opposite directions, mean the neutral rate remains contested and offers little practical guide, giving the Governing Council room to treat a 25 basis point move as predominantly symbolic. The broader implication is that other central banks may face similar pressure to show their own capacity to act, regardless of what the data say at the moment of decision.