Fabio Panetta: Monetary autonomy in a globalised world

Welcome address by Mr Fabio Panetta, Member of the Executive Board of the European Central Bank, at the joint BIS, BoE, ECB and IMF conference on "Spillovers in a "post-pandemic, low-for-long" world", Frankfurt am Main, 26 April 2021.

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

Thank you very much for the opportunity to speak at this conference on spillovers in a "post-pandemic, low-for-long" world.

Over the last decade, globalisation has called into question central banks' ability to achieve domestic objectives. According to some, close economic and financial ties across borders make inflation more of a global phenomenon than a domestic one. And spillovers would leave central banks less able to control domestic financing conditions.

Today, these views are being put to the test.

US authorities are engaging in unprecedented fiscal and monetary expansion, which will show whether forceful policy stimulus can still raise inflation. The associated improvement in the US and global economic outlook has generated upward pressures on sovereign bond yields, which central banks whose economies are less advanced in the recovery are striving to resist. Whether they succeed will reveal the scope of monetary autonomy in a globalised world.

What will the outcome be? For smaller and emerging market economies, the constraints on policy may remain significant. But I expect this episode to confirm that globalisation cannot constrain monetary policy in large economies, like the euro area.