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09/11/2020

Listening event to gather views on ECB monetary policy strategy

Last January, the Governing Council of the European Central Bank (ECB) launched a review of its monetary policy strategy, the primary aim of which is to deliver price stability.

As part of the wide-ranging review, the ECB, together with all the central banks of the euro area, will engage with a variety of stakeholders, including members of the European Parliament, academics and representatives of civil society.

On its part, the Central Bank of Malta will be organising a virtual public listening event for the public and civil society groups on December 14 at 2pm, on Microsoft Teams. There will be a brief presentation delivered by the Bank. However, the main aim is to give stakeholders the opportunity to give their views and most of the 2-hour session will be dedicated to the audience interventions.

Stakeholders may prefer to send their position papers and feedback in writing by December 18 to a dedicated email which can also be used to book your participation in the December 14 event.

The Bank encourages those interested in this important topic to watch the recording of the ECB's own listening event which was held on October 21 - if they have not already done so - which could be helpful when it comes to formulating their positions. The ECB also has a 'Listening Portal' with a considerable amount of information, including multimedia presentations.

The feedback received from stakeholders will be analysed and summarised by the Bank and sent to the ECB, where it will provide meaningful input to the deliberations of the Governing Council.

USEFUL INFORMATION

  • The presentation will be in English but interventions may be made in both English and Maltese.
  • So that everyone will have a chance to air their views, we will limit each intervention to five minutes.
  • The event will be held on Microsoft Teams. Once you register, we will send you an email with a link to the meeting, and once you click on it, you should be able to access the meeting even if you do not have Teams installed.
  • Want to share on social media? Use hashtag #CBMListens

BACKGROUND: WHAT IS THE STRATEGY REVIEW ABOUT?

Monetary policy is one of the principal levers of economic policy. It encompasses the use of tools aimed at influencing developments in money and credit, normally through changes in interest rates. Maintaining price stability, or the rate of inflation consistent with sustainable output and employment levels, is widely seen as the most important contribution that monetary policy can make to the welfare of citizens.

More specifically, the ECB aims to maintain inflation rates below, but close to, 2% over the medium term. The ECB's monetary policy strategy was first adopted in 1998 and some of its elements were clarified in 2003.

However, since 2003, the euro area and the world economy have been undergoing profound structural changes. Economic growth has weakened, reflecting slowing productivity and ageing populations. Together with the impact of the global financial crisis (2007-2008) and of the COVID-19 pandemic, this has led interest rates to fall to unprecedented levels. In turn, this has reduced the space for the ECB and other major central banks to ease monetary policy by using conventional instruments, such as interest rate cuts, in response to inflation persistently below their objective. Too low inflation is problematic because it acts as a drag on economic growth. In contrast, in the past tackling high inflation was a more pressing issue. The threat to environmental sustainability, accelerating digitalisation, globalisation, and developments in the financial system have also changed the environment in which monetary policy operates.

As part of the strategy review, the Governing Council will take stock of how monetary policy strategy has supported the implementation of the ECB's mandate. The formulation of the price stability objective, including the level of the inflation aim, and the flexibility of the horizon to achieve it, will figure prominently in this exercise.

The review will also take into account how other considerations - such as financial stability, employment and environmental sustainability - can be taken into account in pursuing the ECB's mandate. The Governing Council will review the effectiveness and the potential side effects of the monetary policy instruments it has deployed over the past decade. It will examine how the economic and monetary analyses, through which the ECB assesses the risks to price stability, need to be updated. The Governing Council will also explore the interaction between monetary and fiscal policy. Last but certainly not least, it will review its communication practices.

The strategy review should be concluded by mid-2021.

CBM Listening Event

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