Pablo Hernández de Cos: The European Central Bank's new monetary policy strategy

Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain and Chair of the Basel Committee on Banking Supervision, at the meeting organised by the IESE (Escuela de Negocios de la Universidad de Navarra/Business School), Barcelona, 17 September 2021.

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

Accompanying slides: https://staging.bis.org/review/r210923_slides.pdf

Ladies and gentlemen, good morning:

It is a pleasure for me to be able to participate in this meeting organised by IESE Business School in Barcelona.

I would like to take this opportunity to share with you the main pillars of the new monetary policy strategy of the European Central Bank (ECB), unanimously approved by the Governing Council of the ECB and announced on 8 July.

The current review has drawn on an immense collective effort by staff at the ECB and the Eurosytem national central banks over the past 18 months, organised across thirteen work streams. During this process we have listened to opinions from citizens, academics, members of the European Parliament and civil society organisations from across the euro area. The new monetary policy strategy will enable us to improve our capacity to fulfil our price stability mandate in the coming years.

Today, I will first put into context the previous strategic framework and explain the profound structural changes that the euro area has experienced in recent decades, leading the ECB to update its monetary policy strategy. Specifically, I will address two particularly significant issues for the implementation of the current monetary policy: the fall in the equilibrium real interest rates and, as a result, the challenge posed by the lower bound on interest rates for the room for manoeuvre for monetary policy.