Isabel Schnabel: How long is the medium term? Monetary policy in a low inflation environment

Speech by Ms Isabel Schnabel, Member of the Executive Board of the European Central Bank, at the Barclays International Monetary Policy Forum, London, 27 February 2020.

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

Central bank speech  | 
02 March 2020

We are currently living through times of tremendous challenges for the conduct of monetary policy.

Although the actions of major central banks over the past few years have succeeded in easing financial conditions and thereby stabilising growth and inflation, current and expected inflation rates remain stubbornly below target, in spite of years of exceptional monetary policy support.

Subdued price pressures have given rise to widespread scepticism about the ability of monetary policy to bring inflation back to target. While it is widely accepted that central banks cannot fine-tune inflation in the short term, some now even doubt their ability to reach their objective in the medium term.

Today I would like to speak to these concerns by shedding light on some factors that may impede a more forceful and rapid return of inflation to levels closer to 2%, focusing on the euro area.