Philip R Lane: The pandemic emergency - the three challenges for the ECB

Speech by Mr Philip R Lane, Member of the Executive Board of the European Central Bank, at "Navigating the Decade Ahead: Implications for Monetary Policy", an economic policy symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, 27 August 2020.

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

Today, I will discuss the monetary policy measures taken by the ECB in response to the pandemic shock, take stock of the progress to date and outline the main challenges that lie ahead.

The pandemic: the three challenges for the ECB

The nature of the pandemic shock called for an extraordinary policy response. From the outset, there were three challenges for the ECB: (i) to stabilise markets; (ii) to protect credit supply; and (iii) to neutralise the pandemic-related downside risks to the inflation path. Tackling the first pair of challenges is needed in order to achieve the inflation aim, since it is problematic to run an effective monetary policy under conditions of market instability or a credit crunch.

As is shown in Chart 1, the ECB adopted a comprehensive package of crisis measures over a number of months in order to address these three challenges.