Mission impossible ?
Alexis Bienvenu, Fund Manager, La Financière de l’Échiquier (LFDE) | October 2025
Central banks are questioning their purpose. In Europe, several ideas have been put forward to renew the European Central Bank’s (ECB) mandate without necessarily amending its founding treaty. While the ECB’s primary mandate is to ensure price stability, its secondary objective, as defined in Article 105 of the Maastricht Treaty,[1] is to “support the general economic policies in the Community”, particularly “sustainable and non-inflationary growth respecting the environment (…), a high level of employment and of social protection”. On this basis, various ideas have emerged, such as setting preferential interest rates for “green” investments or, more radically, defining a growth and decarbonisation target, as advocated by Emmanuel Macron. There is significant pressure in favour of a broader interpretation of the European mandate.
The opposite is true in Washington. Recently, an initiative has emerged to reduce the scope of the US Federal Reserve’s (Fed) mandate. Until now, the Fed has pursued a broad mandate with two main facets: controlling inflation and working towards full employment. The aim of the Price Stability Act, supported by a group of Republican lawmakers led by French Hill, the Chairman of the House Financial Services Committee, is to limit the Fed’s mandate to controlling inflation.
Surprising as it may seem, especially at a time when the US job market is showing signs of slowing down, this initiative is perfectly in tune with the MAGA movement.[2] When it was founded in 1913, the Fed’s mission was primarily to preserve the country’s banking and monetary stability, which was plagued by recurring financial crises at the time. It was not until the 1970s, a period marked by soaring unemployment and inflation, that the Fed was given an employment-related objective. Since then, it has had to navigate between its two mandates, even if that means sacrificing one for the other when they appear incompatible in the short term. For example, when inflation and unemployment both rose in the early 1980s, the drastic increase in interest rates to combat inflation temporarily took precedence over support for employment.
The proposal to return to the original mandate would offer two key advantages: greater clarity and the absence of conflict between the two objectives. This would not necessarily diminish the Fed’s social and political acceptance, since resentment over inflation could be just as strong as resentment over unemployment, provided that the jobless rate remains relatively moderate. Furthermore, a central bank does not have specific levers at its disposal with regard to employment, such as training, taxation or industrial policy. So why involve it where it cannot be effective? From this perspective, the principle of “less is more” could well apply to the role of central banks.
The outcome of the debate is not yet clear; indeed, it will probably never be definitively settled. The desire to expand or narrow the remit of central banks will continue to fluctuate and guide global liquidity. This is why investors need to pay close attention to the current debate. The world’s economic trajectory will depend to a large extent on how the balance evolves.