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European Central Bank

@ecb

Nov 22, 2021

[THREAD]European banks have taken initial steps towards incorporating climate and environmental risks, but none is close to meeting all supervisory expectations. Have a look at our first report on climate-related risks in the European banking sector bankingsupervision.europa.eu/press/pr/date/… 1/4

Half of the banks we assessed expect to be affected by climate-related risks within the next 3-5 years. Notably, none of the banks which judged that they were not exposed had conducted a proper risk assessment 2/4

Almost all banks have developed plans to improve their practices, but the quality of these plans varies, and progress is too slow. Only one-third of banks have plans in place that are broadly adequate 3/4

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European Central Bank

@ecb

Nov 8, 2021

(THREAD) Monetary policy affects inflation with a considerable time lag. Abrupt tightening of policy would not lower inflation now but slow the economy and cost jobs, leading to inflation below our 2% target later, says Chief Economist Philip R. Lane
1/4

Lane: Our analysis shows three temporary factors pushing up inflation now are projected to fade over the next year:
1) unusually low prices during 2020 and temporary tax cuts
2) an unexpectedly strong recovery that is causing supply bottlenecks
3) a surge in energy prices
2/4

Lane: In the near term, supply bottlenecks and rising energy prices are the main risks to the recovery and the outlook for inflation. However, economic activity could outperform our expectations if consumers become more confident and save less than expected
3/4

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European Central Bank

@ecb

Nov 5, 2021

Central bank money provides the reference value for all other forms of money, underpinning confidence in the currency, says Executive Board member Fabio Panetta. A digital euro would provide the monetary anchor for the digital era. Read the speech ecb.europa.eu/press/key/date…
1/4

Panetta: People’s confidence in private money depends on its convertibility with central bank money, the safest form of money in the economy. The smooth functioning of payment systems ultimately depends on everyone being able to widely access and use sovereign money.
2/4

Panetta: Now that people are shifting towards digital payments and demand for cash as a means of exchange may weaken, we need to ensure the use of central bank money also in digital form. A digital euro would provide a monetary anchor for digital innovation.
3/4

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European Central Bank

@ecb

Nov 5, 2021

(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…
1/4

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
2/4

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
3/4

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European Central Bank

@ecb

Oct 15, 2021

(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…
1/5

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
2/5

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
3/5

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European Central Bank

@ecb

Oct 15, 2021

(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
3/4

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