ECB Chief Economic Philip Lane said in an interview that “the fact that it looks like the vaccines are on their way confirms our baseline scenario and makes it less likely that we will have more severe scenarios.” But “trick” is the Europe is “in the middle of the second wave” of the pandemic and it’s going to be a “mixed reality”. The biggest challenge is “making that adjustment: to realize and to benefit later in 2021 from as widespread vaccination as possible but, in the meantime, to reconcile the need to control the virus with the importance of supporting the economy.”
On monetary policy, Lane said, “if we can keep financing conditions where they are these days, at a low level, that supports the economic recovery and offsetting the pandemic shock to inflation. And in that world – we know and we’ve been saying that –,for example, fiscal policy can be very powerful. In a world with low interest rates, the multiplier effect of fiscal policy can be quite high, compared with normal conditions.”
