A new policy review launched Thursday will help the European Central Bank (ECB) to reconnect with the public, according to ECB Governing Council member and Dutch central bank President Klaas Knot.
At its first policy meeting of 2020, the central bank left interest rates unchanged but kickstarted its first monetary policy review since 2003, in a bid to greater understand why inflation remains consistently below its target of close to 2%.
The review will assess how the ECB looks at price stability, along with its monetary policy toolkit, economic and monetary analyses and communication practices. Financial stability, employment and environmental sustainability will also be in the spotlight.
Euro zone inflation was confirmed at 1.3% year-on-year in December, but Knot told CNBC at the World Economic Forum in Davos on Friday that the Dutch public estimated that it sat at 9% in a recent domestic poll. He suggested that there was a gap in perception due to the ECB's inflation measure omitting owner-occupied housing costs.
While southern European central bankers have tended to deviate in their monetary policy tone from their northern counterparts, Knot denied a rift among the Governing Council.
"We all agree that inflation has been below our aim, and we want to know why this has been the case, why controllability of inflation has fallen short of our expectations, why there is so much fundamental uncertainty, and also of course a question like 'do we measure inflation correctly?'" he said.
"In and of itself, that is a technocratic question. That is not a question of east versus west or north versus south, I think we just want to get the right answer, and perception of our citizens is important."
Knot added that while the central bank has worked to perfect its communication with the markets, it had "underestimated" the importance of the 330 million citizens impacted by its policy decisions. He suggested that the review is "an opportunity to reconnect with our citizens."
In a press conference following the ECB's decision, President Christine Lagarde reiterated her call for "other policy areas" to "contribute more decisively" in order for the euro zone economy to capitalize on the central bank's accommodative monetary measures.
Calls for governments to be more amenable to fiscal spending echo those of her predecessor Mario Draghi, and Lagarde added that the "implementation of structural policies in euro area countries needs to be substantially stepped up" to boost productivity and growth potential.
Speaking to CNBC on Friday, Portuguese Finance Minister and Eurogroup President Mario Centeno said European governments were already launching public investment programs in order to respond both to regional challenges such as the manufacturing slowdown, and global issues like climate change.
He also dismissed concerns that a potential change to how the ECB calculates or measures inflation could have a destabilizing effect on the euro zone economy.
"It is quite important to make all strands of policy action in Europe coherent. This means fiscal, this means monetary policy, this means competition, climate action," Centeno told CNBC's Karen Tso.
He added that he expects the review process to look to "optimize the extent to which monetary policy can have a positive impact in our economies."