The ECB closely monitors fiscal policy since this is one of the main areas where significant shocks to price stability – and also to long-term interest rates – can originate. In fact, many episodes of high inflation in the past were related to a mismanagement of public finances combined with a very accommodating monetary stance.
Monetary policy is geared to maintaining price stability over the medium term and to this end it takes fiscal developments into account. The ECB's monetary policy framework however does not envisage any mechanistic reaction to fiscal policy changes.