Christine Lagarde: Monetary policy during an atypical recovery

Speech by Ms Christine Lagarde, President of the European Central Bank (ECB), at ECB Forum on Central Banking "Beyond the pandemic: the future of monetary policy", Frankfurt am Main, 28 September 2021.

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

The economy is back from the brink, but not completely out of the woods. After a highly unusual recession, the euro area is going through a highly atypical recovery.

This atypical recovery is leading to rapid growth, but also to supply bottlenecks appearing unusually early in the economic cycle. It is also causing inflation to rebound quickly as the economy reopens. And it is helping to accelerate pre-existing trends and new structural changes brought about by the pandemic, which could have implications for future inflation dynamics.

But it is important today to take a step back. To understand how monetary policy should operate in this environment, we need to recognise where we have come from and where current trends suggest we are going. As John Maynard Keynes wrote, policymakers must always "study the present in light of the past for the purposes of the future".