This paper examines the importance of central bank communication in ensuring the effectiveness of monetary policy and in underpinning the credibility, accountability and legitimacy of independent central banks. It documents how communication has become a monetary policy tool in itself; one example of this being forward guidance, given its impact on inflation expectations, economic behaviour and inflation. The paper explains why and how consistent, clear and effective communication to expert and non-expert audiences is essential in an environment of an ever-increasing need by central banks to reach these audiences. Central banks must also meet the demand for more understandable information about policies and tools, while at the same time overcoming the challenge posed by the wider public's rational inattention. Since the European Central Bank was established, the communications landscape has changed dramatically and continues to evolve. This paper outlines how better communication, including greater engagement with the wider public, could help boost people's understanding of and trust in the Eurosystem.

This paper offers an overview of the mandate of the European Central Bank (ECB), as defined by its objectives, the instruments available to achieve them and the constitutional framework that the ECB shall observe in pursuing them. The objectives include the primary objective of maintaining price stability and the secondary objective of supporting the general economic policies in the Union. The price stability objective enjoys primacy amongst the ECB objectives. The Treaties do not provide for a hierarchy of the "general economic policies" that the ECB shall support, although a number of criteria derived from primary law can help in guiding the ECB's priorities in this respect. The ECB is also tasked with contributing to the "smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system". As for the instruments available, these include both measures that directly pursue the objectives and measures that are instrumental in achieving them. Finally, the other constitutional rules that set out the framework within which the ECB pursues its objectives include the principles of conferral, institutional balance, proportionality, equal treatment and non-discrimination, as well as the principle of an open market economy and the prohibition of monetary financing.

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The ECB’s mandate regarding climate change is being actively debated. According to some, the ECB’s mandate excludes any climate-related role, while others argue for a broad responsibility of the ECB in this context. This article argues for a middle way: under certain conditions, the ECB should take climate change into account and act accordingly while pursuing its objectives. EU law and the overall constitutional structure of the Union also provide limits as to how much the ECB can do in this field. This article focuses on the interpretation of the secondary objective of the ECB, according to which the ECB shall support the general economic policies in the Union with a view to contributing to the achievement of the Union’s objectives. This argues that this objective might lend support to ECB measures with an environmental dimension, but it only establishes a contributory power: the ECB cannot make its own environmental policies. ECB, central banking, mandate, monetary policy, climate change, institutional balance