“The pandemic has shown that asset purchases are an indispensable monetary policy tool during times of market stress and economic recession, when room for interest rate cuts has been largely exhausted. After calming financial markets , our asset purchases have helped build confidence and support the economy and inflation outlook. ” This was said by Isabel Schnabel, member of the board of directors of the European Central Bank (ECB), in a conference in Frankfurt entitled “Sustainable Economy in Times of Change”.
“As economic conditions begin to normalize and inflation outlook improves, there is a gradual shift in how asset purchases support the economy as the portfolio rebalancing channel gives way to the signaling channel – Schnabel says -. Asset purchases can increasingly serve as a powerful engagement tool, reinforcing forward-looking indications and reducing uncertainty about the future course of monetary policy. ” The economist concludes: “Given the remaining uncertainty regarding the pandemic and the economic and inflation outlook, our asset purchases, both under the PEPP and the APP, will remain crucial over time.”