Monetary policy in the time of COVID-19, or how uncertainty is here to stay
The COVID-19 crisis has compounded the uncertainty that has come to characterise the European economy. We explore how this uncertainty manifests itsel
This paper was prepared for the European Parliament's Requested by the ECON committee. The original paper is available on the European Parliament’s webpage, as part of a series of papers on “Effects of
Pandemic-Induced
Uncertainty on
Monetary Policy” (here). Copyright remains with the European Parliament at all times.
The COVID-19 crisis has compounded the uncertainty that has
come to characterise the European economy. We explore how
this uncertainty manifests itself in terms of ECB decision-making
and the long-run challenges the ECB faces. Confidence in ECB
actions will come from the contingency scenarios it considers
and communicates on, and from the adoption of potential
policies for a wide range of such scenarios. Greater clarity around
the ECB’s inflation target and surrounding tolerance bands
would also be beneficial.
This document was provided by the Policy Department for
Economic, Scientific and Quality of Life Policies at the request of
the Committee on Economic and Monetary Affairs (ECON) ahead
of the Monetary Dialogue with the ECB President on 19
November 2020.
Related content
Memo to the commissioner responsible for economic and financial affairs
On the digital euro holding limits
The plan for a retail digital euro holding limit, combined with a ‘waterfall approach’ to smooth transactions, sets up an apparent clash of objectives
The EU must unite to confront threats and overcome divisions
