Philip R Lane: Monetary policy in a pandemic - ensuring favourable financing conditions

Speech by Mr Philip R Lane, Member of the Executive Board of the European Central Bank, at the Economics Department and IM-TCD, Trinity College, Dublin, 26 November 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

My aim in this speech today is to explain the role of monetary policy in the pandemic, with a natural focus on the ECB and the euro area. I will first review the monetary policy measures that we have taken in response to the pandemic before highlighting some of the current economic and financial challenges that confront the euro area. I will then explain why the current priority for monetary policy is to ensure favourable financing conditions to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path.

The ECB's monetary policy measures in 2020: a recap

The scale and nature of the pandemic shock called for an extraordinary policy response. The three main tasks for the ECB since the onset of the pandemic have been: first, to stabilise markets; second, to protect credit supply; and third, to neutralise the pandemic-related downside risks to the inflation path. Addressing the first two challenges are high priorities, given that market instability and/or a credit crunch would undermine the running of an effective monetary policy; meeting the third challenge is central to delivering our price stability mandate.