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Published on Monday, September 14, 2020

Global | Monetary policy: from emergency to strategy

The course begins with the hope that the worst of the pandemic and the greatest economic impacts are behind us. The combination of unprecedented monetary and fiscal stimuli has been key to softening the impact of the crisis. With the emergency behind us, central banks are reviewing their strategies.

Key points

  • Key points:
  • Activity and confidence data have rebounded strongly across all geographies and point to the recovery scenario that was expected a few months ago.
  • However, the recovery will differ greatly by country and sector and the degree of uncertainty remains extremely high, meaning that economic policymakers cannot let their guard down.
  • The actions taken by central banks, alongside fiscal measures, have borne fruit: the markets have stabilized, credit has continued to flow and the economy is recovering.
  • Inflation—the ultimate goal of monetary policy—remains an ongoing issue for central banks. Aware of this, they have had to review their strategies.
  • The Fed has led the way and already reported its conclusions: it will give full employment more priority and allow inflation to exceed 2% (for a while) to bring it to an 'average' of 2%. The ECB will focus on defining inflation, but its conclusions will not be known until 2021.

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