Harry Geels: Monetary policy is never neutral and is becoming increasingly political
This column was originally written in Dutch. This is an English translation.
By Harry Geels
Anyone who follows the recent statements and actions of European central bankers will find it difficult to maintain that monetary policy is an apolitical exercise. In fact, it seems that central banks, whether voluntarily or forced by geopolitical circumstances, are increasingly entering the political arena.
Although central banks like to present themselves as independent technocratic institutions, they operate on the basis of clearly defined mandates. The ECB has a strict single mandate: to ensure price stability, generally interpreted as inflation of around 2%. Secondarily, it can support economic policy in the EU, provided this does not conflict with price stability. In addition, it has specific powers in the area of banking supervision.
Unlike the ECB, the Fed has a dual mandate: it must promote both price stability and maximum employment, supplemented by the pursuit of moderate long-term interest rates. This makes the Fed responsible not only for interest rate developments and the money supply, but also for monitoring financial stability and supervising US banks through its board of directors, the twelve regional Federal Reserve Banks and the Federal Open Market Committee.
Lagarde: from central banker to architect of European integration
Central banks have expanded their mandates in recent years. Christine Lagarde, President of the ECB, is becoming increasingly vocal in the debate on Europe's future. In an interview summarised by the Financial Times, she called for “much deeper European integration”, which includes less national autonomy, more uniform regulation, a genuine capital markets union and even joint EU debt, particularly for defence spending.
This is remarkable. The ECB's mandate covers price stability, not the shaping of the European Union. She justifies this position somewhat curiously by stating that all the crises have pushed monetary policy to its limits. She recently urged the EU to become more competitive. However, this is a message that is perfectly suited to a European Commissioner or government leader, but much less so to the president of an independent central bank.
Sleijpen in Kyiv: central bank as diplomatic player
Closer to home, central bankers are also shifting towards geopolitics and foreign policy. In February 2026, the new director of DNB, Olaf Sleijpen, travelled to Kyiv, where he spoke at the National Bank of Ukraine. During his visit, he said that DNB is “determined to make its contribution” to Ukraine and spoke at length about the economic future of Europe and the implications of possible Ukrainian EU membership.
The latter is interesting. EU accession is a purely political issue, determined by government leaders, not by central banks. Nevertheless, Sleijpen speaks out strongly on the subject and links it to European resilience and stability. DNB also communicated that the visit served to discuss the economic future of Europe and “Ukraine's path to EU membership”. He is venturing far beyond the domain of monetary policy. This is geopolitical diplomacy, and geopolitics is politics.
QE: a political instrument disguised as a monetary technique
Anyone who thinks these are new developments may be forgetting that Quantitative Easing (QE) has always had political side effects. QE is presented as a monetary instrument to control inflation and ease financial conditions. But QE has deep political implications. Firstly, it favours certain sectors and groups. The massive purchase of government and corporate bonds caused asset prices to rise sharply. This mainly benefited wealthy individuals and institutional investors.
Secondly, QE reduces the interest costs of governments. When central banks buy government bonds, interest rates fall. Governments can finance themselves more cheaply. This has created fiscal space that is effectively a quasi-fiscal instrument, without parliamentary decision-making. Thirdly, QE creates mutual dependence between politicians and central banks. Countries with high levels of debt have become dependent on central banks to keep financing costs low.
Conclusion: the political mask must come off
The examples of Lagarde and Sleijpen reveal what has been going on for some time: central banks are no longer neutral parties. They are increasingly moving into political domains, from European integration to geopolitical power formation and even EU enlargement. There are really two options. If they want to (continue to) interfere in politics, central banks must become part of the political-democratic process (i.e. EU citizens must be able to vote on policy and administrators).
Or better still, we leave politics to politics and central banks strictly follow their mandate: price stability (for the ECB). This preserves the independence of the central bank, makes policy more transparent and serves the purchasing power of citizens better. Moreover, this would prevent an (ever) broader mandate from leading to “mission creep”. In this regard, it is striking that Trump has appointed Kevin Warsh, an opponent of QE, as the new president of the Fed.
It is still unclear whether the Fed will really become more independent with the upcoming appointment of Warsh. In any case, the financial markets were enthusiastic about the appointment. In Europe, there is still little discussion about the ever-widening mandate. Margaret Thatcher was very sceptical about the ECB in her farewell speech in the House of Commons: ‘A single currency is about the politics of Europe. It is about a federal Europe by the backdoor.’
This article contains the personal opinion of Harry Geels