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21/07/2021

Governor gives keynote speech at Finance Malta conference

Central Bank of Malta Governor Edward Scicluna was invited to make a keynote address to this year's Finance Malta conference, briefing the audience about the implications of the Strategy Review completed recently by the European Central Bank.

Prof. Scicluna is a member of the ECB's Governing Council, which approved the review launched by ECB President Christine Lagarde when she took up her role in November 2019. This was the first review of the monetary policy since 2003.

The review process encompassed multiple layers of stakeholders - including the public, with national central banks - including the Central Bank of Malta - organising their own listening events to ensure Eurosystem-wide debate. All the monetary policy instruments and concepts were minutely examined by both the experts and the Governing Council.

A number of important changes were made as a result of the review.

Prof. Scicluna explained: "We need to keep in mind that the ECB's primary mandate - according to the Treaty on the Functioning of the European Union - is price stability. However, the Treaty does not specify what price stability means. That is where the ECB's monetary policy strategy comes in, which quantifies price stability and in turn helps to anchor inflation expectations ... Now low inflation rates are being seen as just as much of a cause for concern and as a result, the target has now been set to 2% - over the medium-term - and the red flags are not only rates above that - but also rates below it. This decision was aimed at the possibility that the persistent low-inflation environment was being exacerbated by ambiguity about the level of the inflation aim and a perception of the aim being asymmetric."

The review made other important changes. For example, the Governing Council recommended that owner-occupied housing will in due course be included in the Harmonised Index for Consumer Prices. There is now also an action plan on how the ECB will more systematically reflect climate change considerations in its monetary policy operations.

Another aspect to emerge from the review was the importance of communication: a number of changes will be made to the statements issued by the Governing Council following monetary policy decisions which should help to make them more accessible to non-technical audiences.

The Governing Council is also committed to reviewing its monetary policy strategy at regular intervals, with the next assessment taking place in 2025.

The Finance Malta conference took place over two days and included keynote speeches by Finance and Employment Minister Clyde Caruana and the Opposition spokesperson for the economy, financial services and lands Kristy Debono, among other local and international speakers. The conference closed with interviews with Prime Minister Robert Abela and Opposition Leader Bernard Grech.

You can read the Governor's full speech here.

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