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European Central Bank

@ecb

5 Nov

(THREAD) Our monetary policy and price stability objective are oriented towards the euro area as a whole, but they must consider national differences across countries.
Why is having an inflation buffer particularly important for the euro area?⬇️ ecb.europa.eu/pub/pdf/scpops…
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There were two main reasons for having an inflation buffer in the euro area:
1⃣ to help grease the wheels of the economy in the face of price and wage rigidities
2⃣ to limit different price developments across countries – particularly important in a monetary union
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By and large, our 2% headline inflation buffer was enough to prevent low or negative inflation in euro area countries from 1999 to 2019. There were some exceptions after the financial crisis, when inflation was a lot lower than in the first decade of the euro
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European Central Bank

@ecb

15 Oct

(THREAD) We use macroeconomic models to help prepare our monetary policy decisions and build baseline projections. We conducted an assessment of these models as part of our strategy review ecb.europa.eu/pub/pdf/scpops…
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A suite-of-models approach is typically used across the Eurosystem. Although this approach was already in use during our 2003 strategy review, now we use a wider variety of models and existing models have been improved
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The models we use provide a flexible framework for conducting projection exercises and analysing alternative policy options. The suite-of-models approach achieves a good balance between model diversity and specialisation for different uses
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European Central Bank

@ecb

15 Oct

(THREAD) Over the past few years we introduced new monetary policy instruments to achieve our price stability objective.
We looked at their efficiency and potential side effects as part of our strategy review.
Four key findings⬇️ ecb.europa.eu/pub/pdf/scpops…
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1⃣Our monetary policy has effectively eased financing conditions since 2014, supported economic growth, employment and brought inflation closer to our target

2⃣Combining different instruments is more effective than relying on a single tool in a low interest rate environment
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3⃣Side effects have generally been limited so far, but they vary over time and need to be monitored closely

4⃣Our toolkit needs to always be innovative, diversified, flexible and current to remain fit for purpose in our changing world
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European Central Bank

@ecb

15 Oct

(THREAD) Central bank communication has become a monetary policy tool in its own right. Speaking clearly, consistently and effectively is essential for the credibility, accountability and legitimacy of independent central banks today ecb.europa.eu/pub/pdf/scpops…
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Communication helps manage expectations and economic outcomes, so that central banks can deliver on their mandate and keep prices stable.
For example, forward guidance has provided additional monetary stimulus in times of low inflation and low interest rates in the euro area
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Historically, the ECB and national central banks across the euro area have focused on communicating with expert audiences.
Better communication with the general public can boost people’s trust in us and make monetary policy more effective by steering inflation expectations.
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European Central Bank

@ecb

11 Oct

(THREAD) Inflation needs to reach 2% well ahead of the end of our projection horizon and durably for the rest of it, says Chief Economist Philip R. Lane opening the ECB Conference on Monetary Policy. Speech ecb.europa.eu/press/key/date… 1/4

Lane: Our interest rate policy should not react to inflation shocks expected to fade before the end of our projection horizon. We need to see realised progress in underlying inflation 2/4

Lane: A one-off shift in the level of wages as part of the adjustment to a transitory unexpected increase in the price level does not imply a trend shift in the path of underlying inflation 3/4

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European Central Bank

@ecb

8 Oct

(THREAD) Without proper regulation, the expansion of digital finance could amplify international shocks and undermine financial resilience globally, says Executive Board member Fabio Panetta.
Read the speech ecb.europa.eu/press/key/date…
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Panetta: We could see risk-biased technological change, whereby the confluence of big techs’ increasing role in finance and the growth of digital assets such as crypto-assets and stablecoins could bring about sudden and disruptive risks for the global economy 2/4

Panetta: We will need domestic and international cooperation among the relevant authorities to contain the risks that digital finance poses to public policy goals such as financial stability, fair competition, anti-money laundering efforts, consumer protection and privacy 3/4

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