Past Event

Central bank communication in a low interest rate environment

At this event, we are pleased to welcome Mr. Benoît Coeuré, Member of the Executive Board of the European Central Bank at Bruegel.

Date: March 31, 2017, 10:30 am Topic: European Macroeconomics & Governance

SUMMARY

See below for the Video & Audio recordings and the speech

Benoit Coeure gave a speech presenting how communication is used as a tool of monetary policy by central banks. He first presented the theory behind forward guidance. Then he explained more specifically the case of the European Central Bank (ECB) and tried to assess the efficiency of the current non-standard monetary policies.

In a very uncertain environment, communication – and more specifically forward guidance – is the first way for the ECB to achieve one of its main goals: price stability. Asset prices are the first step of the monetary policy transmission chain. Limiting price volatility in the markets and leading markets’ expectations are crucial for the ECB to support the transmission of monetary policies. Getting closer to the lower bound also requires the Governing Council to be even more cautious about the way it communicates its decisions and the coming ones.
Benoit Coeure gave a tentative assessment of the efficiency of ECB’s forward guidance.

According to him, it has been quite efficient so far because:

  • Market prices stabilized (even if forward rates remain more sensitive)
  • The Euro-Area (EA) has been insulated from external shocks
  • It supported well the international environment
  • And it helped monetary policy accommodation by notably enhancing the impact of the assets purchases program (APP) through asset prices.

About negative rates and the current level of the deposit facility rate (DFR), he added that we remain far away from the physical and economic lower bounds. He emphasized the need for a disciplined communication because markets are not a homogenous entity and can sometimes internalize too many past negative shocks. Central banks have therefore to lead them.
During the discussion that followed the speech, Benoit Coeure and Guntram Wolff tackled several major issues. Benoit Coeure highlighted that as long as the inflation path will not be sustained, forward guidance on rates will remain necessary. He emphasized again the strong connection between volumes and rates as stable latter enhances the impact of APP by incentivizing financial institutions to trade money.

However, there is obviously a level of the DFR where the current policy will not be efficient anymore. The current deflationary environment also put into question the relevance and the role of the DFR. Neither a significant acceleration of demand for saves nor an increase of financial instability have been observed from the start of unconventional monetary policies until now and we can safely say that we remain far away from both lower bounds.
During the Q&A, it was first mentioned that the heterogeneity of the Governing Council is crucial and that we could go even further in terms of transparency by disclosing the votes. The use of dot plots, like at the Fed, is a trickier issue. Second, in a period of high uncertainty, the need for clarity about knowledge and honesty is even more important. The risk of not being clear enough is to add even more uncertainty. There is a duty to explain. Third, divergence in communication from the members of the Governing Council is not something that has to be addressed: the current level of information justifies the fact that there are different views within the Council.

Finally, improvements in inflation are noted to be not stable and mainly led by energy which re-enforces the necessity to keep ECB’s stance unchanged until sustainable positive developments will be observed.

Notes by Justine Feliu, Research Assistant, Bruegel

Video and audio recording


On 31 March 2017 Benoît Coeuré was at Bruegel and spoke about Communication as a tool for monetary policy, specifically in a low-interest rate environment.

Full speech of Benoît Coeuré

Read the full speech

Schedule

Mar 31, 2017

10:30-11:00

Check in and welcome coffee

11:00-11:30

Presentation

Benoît Coeuré, Member of the Executive Board of European Central Bank

11:30-12:00

Discussion

Chair: Guntram B. Wolff, Director

Benoît Coeuré, Member of the Executive Board of European Central Bank

12:00-12:30

Q&A

12:30

Lunch

Speakers

Benoît Coeuré

Member of the Executive Board of European Central Bank

Guntram B. Wolff

Director

Location & Contact

Bruegel, Rue de la Charité 33, 1210 Brussels

Matilda Sevon

matilda.sevon@bruegel.org

Read article

Parliamentary Testimony

European Parliament

The role of independent expertise in legislative process

Testimony before the European Parliament Committee on the Internal Market and Consumer Protection (IMCO).

By: Zsolt Darvas and J. Scott Marcus Topic: European Macroeconomics & Governance, European Parliament, Testimonies Date: July 18, 2018
Read article

Blog Post

Germany’s savings banks: uniquely intertwined with local politics

German savings banks, known as Sparkassen, form an important feature of the country's banking assets. Unlike in other European countries, German Sparkassen also hold direct links with local political communities. This post focuses on the Sparkassen's structural links and relationships with elected politicians. Three findings which do not appear to have been specifically documented previously stand out.

By: Jonas Markgraf and Nicolas Véron Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: July 18, 2018
Read about event More on this topic

Past Event

Past Event

Should we revisit the patent system for pharmaceutical products?

Analysis of the legal issues with the current IP system for regulated market authorisations for pharmaceutical products, as well as its economic effects.

Speakers: Arno Hartmann, Christian Jervelund, Margaret K. Kyle, Roberto Romandini, Bruno van Pottelsberghe, Amaryllis Verhoeven and Reinhilde Veugelers Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: July 9, 2018
Read article More on this topic More by this author

Opinion

Ubu ou Machiavel?

L'administration Trump veut imposer une approche transactionnelle des relations économiques gouvernée par le rapport de force bilatéral en lieu et place du contrat multilatéral. Un défi d'une ampleur inédite pour l'Europe.

By: Jean Pisani-Ferry Topic: Global Economics & Governance Date: July 6, 2018
Read article More on this topic More by this author

Blog Post

EU income inequality decline: Views from an income shares perspective

Over the past decade, the income share of low earners has increased in the EU while that of top earners has slightly declined. Although the upward convergence of the impoverished central European population is impressive, the southern European poor have faced a major setback while the southern European rich have hardly suffered.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: July 5, 2018
Read article More on this topic More by this author

Opinion

Griechenland braucht einen Neuanfang

This was first published by Die Zeit. Acht Jahre nach Beginn des ersten Hilfsprogramms für Griechenland ist es soweit – Griechenland soll wieder auf eigenen Füßen stehen. Die Eurogruppe soll heute das Ende des dritten Hilfsprogramms beschließen und die Modalitäten für die Zeit danach definieren. Ziel sollte es jetzt sein, einen tragfähigen Ausstieg aus dieser für alle Seiten […]

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: July 3, 2018
Read about event More on this topic

Past Event

Past Event

Trade war trinity: analysis of global consequences

Analysis of the long-term impact of the trade war and its three key players: EU, US, and China.

Speakers: Alicia García-Herrero, Ignasi Guardans and Carl B Hamilton Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 28, 2018
Read article Download PDF More on this topic

Policy Contribution

Cryptocurrencies and monetary policy

Can cryptocurrencies acquire the role of money? And what are the implications for central banks and monetary policy? Read the policy contribution to understand what challenges cryptocurrencies have to overcome to replace official currencies.

By: Grégory Claeys, Maria Demertzis and Konstantinos Efstathiou Topic: Finance & Financial Regulation Date: June 28, 2018
Read about event More on this topic

Past Event

Past Event

Euro tragedy: a drama in nine acts

This event will feature a presentation by Ashoka Mody of his new book, which argues that the Euro is at the root of the problems the European Union faces today.

Speakers: Maria Demertzis, Ashoka Mody and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 27, 2018
Read about event More on this topic

Past Event

Past Event

EU-LAC Economic Forum 2018

The second edition of the EU-LAC Economic Forum, a high level gathering for in-depth research-based exchanges on economic issues between European, Latin American and Caribbean (LAC) policy makers and experts.

Speakers: Angel Badillo, Federico Bonaglia, Maria Demertzis, Sylvie Durán, Guillermo Fernández de Soto, Alicia García-Herrero, Elisa Grafulla, Gonzalo Gutiérrez, Bert Hoffmann, Juan Jung, Emilio Lamo de Espinosa, Carlos Malamud, J. Scott Marcus, Neven Mimica, Fabio Nasarre de Letosa, Detlef Nolte, Anne Sperschneider and Guntram B. Wolff Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 26, 2018
Read about event More on this topic

Past Event

Past Event

For a stronger and more integrated Europe

This event will feature the presentation of the Economic Survey of the European Union 2018 and Economic Survey of the Euro Area 2018.

Speakers: Angel Gurría, Zsolt Darvas, Pierre Beynet and Aida Caldera-Sanchez Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 19, 2018
Read article Download PDF More on this topic

Policy Contribution

Is the European Semester effective and useful?

The authors study whether and to what extent EU countries implement recommendations on macroeconomic imbalances given by the EU in the so-called European Semester. Overall implementation of recommendations by EU countries has worsened in the last few years, in particular when it comes to recommendations addressed to countries with excessive macroeconomic imbalances.

By: Konstantinos Efstathiou and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: June 13, 2018
Load more posts