Pablo Hernández de Cos: The new European Central Bank monetary policy strategy and its implications for the current high-inflation episode

Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain and Chair of the Basel Committee on Banking Supervision, at The Euro YearBook presentation "The European Central Bank's new monetary policy strategy", organised by Fundación ICO, Instituto Español de Analistas Financieros and Fundación de Estudios Financieros, Brussels, 17 February 2022.

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

Ladies and gentlemen, good morning:

It is a pleasure for me to be able to participate in this meeting organised by Fundación ICO, Instituto Español de Analistas Financieros and Fundación de Estudios Financieros.

Here at this 2022 edition of the Euro Yearbook, I would like to deliver a few remarks regarding the main aspects of the review of the monetary policy strategy of the European Central Bank (ECB) that was concluded in the middle of last year. I would also like to emphasise why our new monetary policy strategy provides us, in the Eurosystem, with the appropriate framework and tools to handle the high-inflation episode that we are currently confronting.

I will structure my remarks today into three parts. First, I will explain why, given the profound structural changes that the euro area has experienced in recent decades, it was appropriate for the ECB to undertake a comprehensive review of its monetary policy strategy. In particular, I will talk about the fall in the natural interest rate that has taken place over the last few decades – in the euro area and in most advanced economies – and how this secular process has imposed some limitations – through the interest rate lower bound – on the conduct of monetary policy.