Pablo Hernández de Cos: The euro area outlook, monetary policy at the current juncture, and lessons for the ECB strategy review

Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain and Chair of the Basel Committee on Banking Supervision, at the Ernst and Young Insights Forum, 23 April 2021.

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

Good afternoon, ladies and gentlemen.

I would like to thank EY and its President, Federico Linares, for their kind invitation to the EY Insights Forum. It is a pleasure for me to participate in this initiative that brings together research institutes, think-tanks and policymakers to reflect on economic issues. In today's talk, I will first comment on the euro area growth and inflation outlook at the current juncture. I will then discuss what this outlook may imply for monetary policy in the euro area, including how our pledge at the ECB Governing Council to preserve favourable financing conditions may be interpreted in the light of this outlook. Finally, I will take a longer view and discuss what lessons from recent economic and monetary policy developments in other advanced economies could be extracted for our ongoing monetary policy strategy review at the ECB.

The current outlook for activity and prices in the euro area

The global economy has been recovering since the sharp contraction due to the onset of the COVID-19 pandemic in the first half of 2020. In addition to easing restrictions, several factors have acted as key levers. These include the substantial adaptation by households, firms and institutions to living with COVID-19 and with less mobility; the strong support of extraordinary global economic policies; and the dynamism of international trade, especially in goods.