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Lagarde assesses monetary policy during unusual recovery

President of the European Central Bank, Christine Lagarde spoke before ECB Forum on Central Banking. Her speech was entitled: “Beyond the pandemic: the future of monetary policy”.
Lagarde has pointed out that the economy is back from the brink, but not completely out of the woods. After a highly unusual recession, the Eurozone is going through a highly unusual recovery.
The unusual, or rather 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”, Lagarde added.
The ECB President also said that it is important today to take a step back. To understand how monetary policy should operate in this environment. Lagarde noted: “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”.

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