INTERVIEW
14 January 2022
Monetary policy requires trust
Our monetary policy is guided solely by our price stability mandate, Executive Board member Isabel Schnabel tells Süddeutsche Zeitung. It can only succeed if people trust us.
Interview
ECONOMIC BULLETIN
13 January 2022
Economic Bulletin out now
This publication presents the economic and monetary information which forms the basis for the Governing Council’s policy decisions.
It is released eight times a year, two weeks after each monetary policy meeting.
Economic Bulletin Issue 8, 2021
EXPLAINER
What is monetary policy?
Why does monetary policy matter? Because it has a direct impact on interest rates and an indirect impact on inflation, the economy and employment.
Tell me- 12 January 2022
- EURO AREA SECURITIES ISSUES STATISTICSAnnexes
- 12 January 2022
- EURO AREA SECURITIES ISSUES STATISTICS
- 12 January 2022
- EURO AREA SECURITIES ISSUES STATISTICS
- 11 January 2022
- PRESS RELEASE
- 11 January 2022
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 11 January 2022
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 11 January 2022
- EURO AREA ECONOMIC AND FINANCIAL DEVELOPMENTS BY INSTITUTIONAL SECTOR (EARLY)
- 11 January 2022
- EURO MONEY MARKET STATISTICS
- 14 January 2022
- Introductory statement by Christine Lagarde, President of the ECB, at the meeting of the Conference of Parliamentary Committees for Union Affairs of the Parliaments of the European Union (COSAC)
- 11 January 2022
- Welcome address by Christine Lagarde, President of the ECB, at a virtual ceremony marking the change of office of the President of the Bundesbank
- 8 January 2022
- Remarks by Isabel Schnabel, Member of the Executive Board of the ECB, at a panel on “Climate and the Financial System” at the American Finance Association 2022 Virtual Annual Meeting
- 16 December 2021
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 16 December 2021EnglishOTHER LANGUAGES (22) +Related
- 10 December 2021
- Lecture by Fabio Panetta, Member of the Executive Board of the ECB
- 14 January 2022
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Markus Zydra, Bastian Brinkmann and Meike Schreiber on 10 January 2022
- 11 January 2022
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Isabella Bufacchi
- 7 January 2022
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Robert Shortt on 7 January and published on 7 January 2022
- 22 December 2021
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Eric Albert on 16 December and published on 22 December
- 7 December 2021
- Interview with Christine Lagarde, President of the ECB, conducted by Fabio Fazio on 28 November and published on 7 December 2021
- 31 December 2021
- Blog post by Christine Lagarde, President of the ECBEnglishOTHER LANGUAGES (16) +Details
- Summary
- Europe and the euro have become inseparable, President Christine Lagarde writes in The ECB Blog to mark the 20th anniversary of euro banknotes and coins. She recalls her first encounter with a euro banknote, and reflects on how far the euro has come and what lies ahead.
- 19 November 2021
- Blog post by Fabio Panetta, Member of the Executive Board of the ECBDetails
- Summary
- To continue playing its role as the anchor of the monetary system, central bank money will need to respond to evolving needs, says Executive Board member Fabio Panetta. This means that we must intensify the work on central bank digital currencies.
- 4 November 2021
- Blog post by Christine Lagarde, President of the ECBEnglishOTHER LANGUAGES (16) +Details
- Summary
- The COP26 summit is a vital opportunity to set out a clear path towards a zero-carbon world, President Lagarde writes in a blog post. While the road ahead may seem daunting, she argues that a credible transition path will need clear signposts to break it up into more manageable stages.
- 14 September 2021
- Blog post by Isabel Schnabel, Member of the Executive Board of the ECBDetails
- Summary
- While rising inflation understandably worries people, current inflation rates should be interpreted with caution, writes Executive Board member Isabel Schnabel.
- 31 August 2021
- Contribution by Isabel Schnabel, Member of the Executive Board of the ECB, to the International Monetary Fund’s magazine Finance and DevelopmentDetails
- Summary
- The existential threat posed by climate change implies that central banks must not stand on the sidelines in the fight against global warming, writes Executive Board member Isabel Schnabel. Our ambitious climate action plan outlines how the ECB will contribute within its mandate.
- 13 January 2022
- ECONOMIC BULLETIN
- 13 January 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2021Details
- Abstract
- This box discusses the fiscal policy recommendations addressed to the euro area countries against the background of the coronavirus (COVID-19) crisis.
- JEL Code
- E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H6 : Public Economics→National Budget, Deficit, and Debt
- 13 January 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2021Details
- Abstract
- This box describes the ECB’s liquidity conditions and monetary policy operations during the fifth and sixth maintenance periods of 2021 from 28 July 2021 to 2 November 2021.
- JEL Code
- E40 : Macroeconomics and Monetary Economics→Money and Interest Rates→General
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 13 January 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2021Details
- Abstract
- This box presents a model-based approach for distinguishing between two unobserved components embedded in market-based measures of inflation compensation, namely inflation expectations and inflation risk premia. The approach relies on econometric models used to analyse the term structure of inflation-linked swap rates. Estimates indicate that the rise in inflation compensation observed since mid-2020 is attributable more to inflation risk premia than to inflation expectations. This suggests that the rise is mainly related to a shift in the inflation risks priced in, from lower than expected to higher than expected.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E47 : Macroeconomics and Monetary Economics→Money and Interest Rates→Forecasting and Simulation: Models and Applications
- 13 January 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2021Details
- Abstract
- This box explores new indicators of the financing conditions faced by euro area companies, based on firm-level survey data. Drawing on the rich dataset provided by the survey on the access to finance of enterprises (SAFE), three synthetic indicators summarise how firms have perceived their financing conditions in the euro area since 2009. Overall, the indicators suggest there have been several important phases in firms’ perceptions of financing conditions, which relate closely to ECB monetary policy measures. The empirical analysis shows that, after the onset of the pandemic, firms’ perceptions of financing conditions played an increasingly important role in explaining their expectations of the future availability of bank loans.
- JEL Code
- D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
H32 : Public Economics→Fiscal Policies and Behavior of Economic Agents→Firm
- 13 January 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2021Details
- Abstract
- During the economic recovery from the COVID-19 pandemic, supply and demand imbalances have put a strain on global production networks. We develop a two-step vector autoregression (VAR) procedure to gauge the impact of supply chain shocks on activity, trade and prices. In the first step, we use a sign restricted structural VAR with PMI output and PMI delivery times to recover the supply chain shock, which is our proxy for measuring episodes of supply chain strains. In the second step, we plug such shocks as exogenous variables into a companion VAR with endogenous real and nominal variables. Counterfactual scenarios are constructed to assess the effects of the supply bottlenecks, which are having a negative impact on real variables and pushing up prices. A medium-term assessment of the supply chain strains is also provided.
- JEL Code
- C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
E30 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→General
F40 : International Economics→Macroeconomic Aspects of International Trade and Finance→General
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
- 13 January 2022
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 8, 2021Details
- Abstract
- Understanding the expectations of households, firms and financial markets regarding monetary policy and macroeconomic developments is important for the conduct of monetary policy. Surveys can play an important role in understanding expectations. The ECB Survey of Monetary Analysts (SMA) brings together information on financial sector expectations of monetary policy and macroeconomic developments in one coherently structured and regularly updated survey. The objective of the SMA is to “gather regular, comprehensive, structured and systematic information on market participants’ expectations”. The ECB launched the SMA as a pilot project in April 2019 and, after concluding the pilot phase, has published aggregate results since June 2021. This article looks at the structure of the survey and the rationale behind it and explains what role it plays in understanding changes in market participants’ expectations of euro area monetary policy and the macroeconomy.
- JEL Code
- E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 12 January 2022
- OCCASIONAL PAPER SERIES - No. 289Details
- Abstract
- Global value chains (GVCs) have shaped the dynamics of globalisation in recent years. This paper reviews key concepts and tools to measure countries’ involvement in GVCs, explores recent trends and investigates the underlying drivers of GVC participation empirically. The analysis in the paper finds that in the last decade, GVCs have undergone an important transformation, with participation falling on the back of rising trade costs and the trade integration of some large emerging market economies slowing, while the role of recent technological developments remains unclear. In addition, supply chains appear to have become increasingly regional over time. The paper also offers an insight into the role of production chain linkages in the transmission of recent global shocks across countries, uncovering important amplification effects on trade and activity. Finally, it discusses future prospects for GVCs and global trade, including in the light of developments associated with the coronavirus pandemic.
- JEL Code
- F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade
F15 : International Economics→Trade→Economic Integration
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
- 12 January 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2021Details
- Abstract
- This box reviews how the ECB’s communication on the economic outlook has evolved over time and how it compares with that of two other major central banks. Standard metrics reveal that over time the communication on the economic outlook has gradually become clearer, making monetary policy more transparent and effective. The ECB’s communication differs from that of the Bank of England and the Federal Reserve Board, reflecting the differences in their monetary policy strategies. The ECB uses the term “money” more often, while the Bank of England and the Federal Reserve Board communicate the terms “unemployment” and “slack” more frequently. Textual analysis underscores the importance of narratives in communicating quantitative economic forecasts. To build informative narratives, the ECB relies on a wide range of economic models, tools and surveys.
- JEL Code
- E30 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→General
E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
- 12 January 2022
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 8, 2021Details
- Abstract
- How central banks communicate matters. Communication has become a key instrument to make policy more effective and improve central banks’ transparency and accountability, ultimately helping to build trust among the wider public whom they serve. As part of its recent strategy review, the ECB analysed how its communication, in particular with the wider public, can be improved. This article further complements the findings of the strategy review. The article aims to provide a better understanding of the ECB’s audiences among the wider public, what matters to them, and what happens between the sending and the receiving end of ECB communication. The findings point to possible avenues to make the ECB’s monetary policy communication more effective.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 11 January 2022
- WORKING PAPER SERIES - No. 2636Details
- Abstract
- Does the level of deposits matter for bank fragility and efficiency? In a banking model with endogenous bank runs and a consumption-saving decision, we show that the level of deposits has opposite effects on bank fragility depending on the nature of bank runs. In an economy with panic-driven runs, higher deposits make banks less fragile, while the opposite is true when runs are only driven by fundamentals. The effect of deposits is not internalized by depositors. A saving externality arises, leading to excessive fragility and insufficient liquidity provision. The economy features under-saving when runs are panic driven, and over-saving when fundamental driven.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 11 January 2022
- OCCASIONAL PAPER SERIES - No. 288Details
- Abstract
- A key element of the European reform agenda is to simplify the EU fiscal governance framework by moving towards a single debt anchor and a single operational indicator as the basis for formulating fiscal targets and assessing compliance. This paper puts forward an in-depth analysis of two alternative fiscal performance indicators currently used in the EU fiscal framework: the change in the structural balance and the expenditure benchmark. Comparing these two indicators allows us to identify options for the design of a fiscal performance measure – such as assumptions on cyclical adjustment and the inclusion of fiscal variables – and assess their policy impact. Our paper finds that the expenditure benchmark used in the EU fiscal governance framework has advantages over the change in the structural balance. However, it still has scope for improvement. The paper also shows that taking account of interest payments in the expenditure benchmark would make fiscal policy more supportive of the monetary policy stance.
- JEL Code
- C54 : Mathematical and Quantitative Methods→Econometric Modeling→Quantitative Policy Modeling
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
E65 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Studies of Particular Policy Episodes
F54 : International Economics→International Relations, National Security, and International Political Economy→Colonialism, Imperialism, Postcolonialism
F47 : International Economics→Macroeconomic Aspects of International Trade and Finance→Forecasting and Simulation: Models and Applications
- 11 January 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2021Details
- Abstract
- This box reviews the key factors that have been causing global supply chain disruptions and assesses their impact on euro area industrial production. After the exceptionally swift and strong rebound in global demand since the second half of 2020, supply has been increasingly unable to meet demand, with repercussions on euro area manufacturing production. Moreover, disruptions associated with container shipping, shortages of raw materials and semiconductors, as well as selective lockdown measures in key Asian countries, have also adversely affected the normal functioning of global supply chains. These disruptions are estimated to have reduced the level of euro area industrial production by 2.6% cumulatively between October 2020 and September 2021. Since this equates to around 20% of total value added, these estimates suggest that euro area GDP would have been around 0.5% higher in 2021 had it not been for the supply bottlenecks. This estimate can be considered a lower bound, as supply bottlenecks continued to affect production in the last quarter of 2021, as well as having an impact on construction and business services.
- JEL Code
- C30 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→General
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
F60 : International Economics→Economic Impacts of Globalization→General
- 10 January 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2021Details
- Abstract
- Post-pandemic labour market developments in the United States and United Kingdom show that imbalances between labour demand and labour supply are causing a high and unusual tightness in the labour market for such an early stage in a recovery. This could translate into broad-based wage pressures, in turn posing a risk to inflation. Such pressures are becoming increasingly visible in the United States, but are less marked in the United Kingdom.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
- 29 December 2021
- OTHER PUBLICATION
- 28 December 2021
- WORKING PAPER SERIES - No. 2635Details
- Abstract
- Standard New Keynesian (NK) models feature an optimal inflation target well below two percent, limited welfare losses from business cycle fluctuations and long-term monetary neutrality. We develop a NK framework with labour market frictions, endogenous productivity and downward wage rigidity (DWR) which challenges these results. The model features a non-vertical long-run Phillips curve between inflation and unemployment and a trade-off between price distortions and output hysteresis that change the welfare-maximizing inflation level. For a plausible set of parameters, the optimal inflation target is in excess of two percent, a target value commonly used across central banks. Deviations from the optimal target carry welfare costs multiple times higher than in traditional NK models. The main reason is that endogenous growth and DWR generate asymmetric and hysteresis effects on unemployment and output. Price level targeting or a Taylor-rule responding to the unemployment rate can handle better the asymmetric and hysteresis effects in our model and deliver significant welfare gains. Our results are robust to the inclusion of the effective lower bound on the monetary policy interest rate.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
O41 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→One, Two, and Multisector Growth Models
J64 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Unemployment: Models, Duration, Incidence, and Job Search
- 22 December 2021
- SURVEY OF MONETARY ANALYSTS AGGREGATE RESULTS
- 22 December 2021
- WORKING PAPER SERIES - No. 2634Details
- Abstract
- We study exchange rate pass-through (ERPT), i.e., the impact of exchange rate movements on inflation, focusing on euro area import prices at a sectorally disaggregated level. Our estimation strategy is based on VAR-X models, thus incorporating both endogenous and exogenous explanatory variables. The impulse response functions not only allow to study the extent but also the dynamics of ERPT. We find that ERPT is heterogeneous in terms of magnitude across sectors. We further investigate what industry-specific characteristics affect the heterogeneity of ERPT. Across various model specifications including import penetration, market integration, competition and value chain integration, we find that higher market concentration and higher backward integration in global value chains decrease pass-through, in line with previous findings in the literature.
- JEL Code
- C50 : Mathematical and Quantitative Methods→Econometric Modeling→General
F30 : International Economics→International Finance→General
F40 : International Economics→Macroeconomic Aspects of International Trade and Finance→General
- 22 December 2021
- WORKING PAPER SERIES - No. 2633Details
- Abstract
- We study the relationship between fiscal policy and household saving across the euro area countries for the period 1999-2019. To this extent, we propose a thick modelling approach, which allows a vast number of model specifications in a dynamic panel setting. We find that fiscal expansions are associated with an increase in household saving rate in the euro area, which supports a partial, but not full, Ricardian equivalence channel. The relationship holds regardless of how we measure the (discretionary) fiscal policy impulse. The median saving offset across all baseline specifications is around 19% in the short run and 41% in the long run. Various robustness checks underpin the basic results, while also pointing to model and estimation uncertainty and no robust evidence for total private saving offset. Our results for the euro area are broadly in line with the literature, albeit they tend to yield a somewhat weaker evidence for the saving offset of fiscal policy, particularly in relation to earlier studies.
- JEL Code
- D14 : Microeconomics→Household Behavior and Family Economics→Household Saving; Personal Finance
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H6 : Public Economics→National Budget, Deficit, and Debt
- 21 December 2021
- WORKING PAPER SERIES - No. 2632Details
- Abstract
- Monetary policy aims at affecting corporate borrowing by influencing the marginal costs of firms, but its potency can be conditioned by the degree of market competition. We first identify conditions under which changes in marginal costs may have different effects on credit constraints and output under different competitive environment, in a simple Cournot competition setting. We then exploit changes in monetary policy to examine whether the pass-through of borrowing costs is affected by market structure. First, we use as an experiment the announcement of the ECB Outright Monetary Transactions (OMT) program in a triple-differences specification. We show that small firms (which have low market power and higher credit constraints) in "stressed" countries (which benefited more from the policy) within less concentrated sectors experienced a larger reduction in credit constraints than similar firms in more concentrated sectors. Second, we exploit continuous state-of-the-art measures of monetary policy shocks to study how market structure affects pass-through to real variables, like investment and sales growth. We find evidence that firms with more market power respond less to monetary policy shocks. These results show that the interaction of borrowing capacity and market structure matters, and that concentration may have important effects on monetary policy transmission.
- JEL Code
- D4 : Microeconomics→Market Structure and Pricing
E4 : Macroeconomics and Monetary Economics→Money and Interest Rates
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
L1 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance - Network
- Discussion papers
Interest rates
| Marginal lending facility | 0.25 % |
| Main refinancing operations (fixed rate) | 0.00 % |
| Deposit facility | − 0.50 % |
Inflation rate
Inflation dashboardExchange rates
| USD | US dollar | 1.1447 | |
| JPY | Japanese yen | 130.17 | |
| GBP | Pound sterling | 0.83508 | |
| CHF | Swiss franc | 1.0429 |
Financial stability
Our tasks Institutional framework Financial Stability Review Macroprudential policy measuresMarket operations
Open market operations Asset purchase programmes Lendings of holdings under PSPPNOT AN EXPERT? CHECK EXPLAINER
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