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Monetary Dialogue in November 2023- Summary of parliamentary scrutiny activities
This briefing provides a summary of all scrutiny activities of the European Parliament related to euro area monetary policy in the period between September 2023 and November 2023. For a recap of the key monetary policy developments and decisions taken by the European Central Bank in that period, please refer to our briefing published ahead of the 27 November Monetary Dialogue. We publish these documents regularly ahead and after each Monetary Dialogue with the European Central Bank.
Euro area monetary policy: Quarterly overview, November 2023
This briefing paper was prepared ahead of the Monetary Dialogue between the Committee on Economic and Monetary Affairs (ECON) and the European Central Bank (ECB) President on Monday, 27 November. It provides a summary of key monetary policy developments and decisions taken by the ECB’s Governing Council.
Climate Change and Monetary Policy in the Euro Area
Climate considerations have entered the agenda of the ECB in recent years. The ECB has intensified its analyses of the macroeconomic impact of climate change and started to evaluate and implement more active approaches and best practices to support the green transition. In this paper we discuss how climate change could affect monetary policy, other policies available to the ECB to support the green transition, and potential trade-offs with its primary objective of price stability. This document ...
Comparative analysis of monetary policy and inflation dynamics in the euro area and the United States
After a series of unprecedented interest rate hikes on both sides of the Atlantic, inflation in the euro area and the United States is cooling down from a 40-year high. However, uncertainty about the inflation and growth outlook remains high, as the European Central Bank and the Federal Reserve are considering their next moves. Five papers were prepared by the ECON Committee’s Monetary Expert Panel, making a comparative assessment of inflation dynamics and monetary policy stances in the two monetary ...
Climate Change and Monetary Policy: Risks, instruments, & chances
Rising inflation complicates the alignment of the ECB’s policies with the Paris Agreement. This paper provides novel evidence for inflationary pressures arising from natural disasters. We then discuss the effectiveness of monetary instruments to boost a green transition, concluding that the scope of policy measures used thus far is limited. As additional measures, we advise active rebalancing of the ECB’s bond holdings towards greener issuers, enforcing stricter disclosure standards, and differentiating ...
Comparing Fed and ECB monetary policies
The European Central Bank and Federal Reserve have taken similar approaches to tightening monetary policy to tackle high inflation. However, relative to the US, euro area inflation has been driven more by supply shocks and less by strong demand. The euro area economy is also weakening while the US economy is still growing solidly. Markets expect the Fed to ease more than the ECB in 2024 but falling inflation and a weak euro area economy may see the opposite occur. This document was provided by ...
Shades of Green Monetary Policy- Would a green tilt help?
Any greening of monetary policy is likely to have at best a marginal effect on emissions given the very small spreads on the yields of green bonds and the cap on emissions inherent in the EU’s emissions trading system. Trying to limit the supply of capital to brown industries could backfire as these industries are those most in need of financing for capital-intensive decarbonisation. These arguments apply both to the tilting of investments under the corporate sector purchase programme (CSPP) towards ...
The Inflation Episode - Similarities and differences in the euro area and the United States
Inflation has surged and then declined in broadly similar ways in the euro area and the United States, because it has been driven by the impact of the pandemic and its aftermath. Yet, specific differences reflect how monetary and fiscal policies responded as well as the impact of the Russian invasion of Ukraine. The central banks face whole new challenges as they prepare to navigate the next phase now that inflation has rapidly declined, but also further along. This document was provided by the ...
Low-carbon allocation in monetary policy implementation
This paper analyses how the European Central Bank (ECB) can incorporate climate change considerations in its monetary policy implementation. It reviews the impact of climate shocks on inflation and the instruments to decarbonise the ECB’s asset and collateral portfolio. The paper concludes with recommendations for the ECB to increase the low-carbon allocation in its monetary policy framework. This will in turn speed up the green transition and decrease the euro area’s fossil fuel dependency. This ...
Inflation and monetary policy across the Atlantic: A comparison
Under the stress test of the inflation process, the two central banks' stances across the Atlantic share similarities but show also significant differences. Similarities and differences are reflected also in inflation dynamics in the US and the euro area. Differences are mainly due to the mix of factors that originated the take-off of inflation, some structural features of the economies, the institutional contexts and associated fiscal stances. This document was provided by the Economic Governance ...