Isabel Schnabel: COVID-19 and monetary policy - reinforcing prevailing challenges

Speech by Ms Isabel Schnabel, Member of the Executive Board of the European Central Bank, at The Bank of Finland Monetary Policy webinar "New Challenges to Monetary Policy Strategies", Frankfurt am Main, 24 November 2020.

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

The pandemic has tested many parts of our societies and economies in ways we had never expected. Nine months into one of the most severe crises since World War II, we are still in the early stages of understanding the pandemic's full ramifications.

Some sectors of our economies may never return to their previous size. New business models are being developed. Inequality is rising, both within and across countries. And global value chains are being re-examined.

History unambiguously suggests that the crisis is likely to fundamentally reshape the way our economies operate. Ultimately, these shifts may also affect the conduct of monetary policy. Central banks may have to change how they pursue their mandates in the face of evolving consumer preferences and changing technologies.

Predicting the direction and scope of these shifts for monetary policy is inherently difficult. Yet, the inability to predict is no excuse for not preparing for future contingencies. At the ECB, we are doing this as part of our ongoing monetary policy strategy review.