The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.
The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.
The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on the economy, and risks to the economic outlook remain.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.
Implementation Note issued April 28, 2021
Compliments of the U.S. Federal Reserve.

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Today, the Commission is adopting the first EU Strategy on voluntary return and reintegration. The Strategy promotes voluntary return and reintegration as an integral part of a common EU system for returns, a key objective under the New Pact on Migration and Asylum. It sets out practical measures to strengthen the legal and operational framework for voluntary returns from Europe and from transit countries, improve the quality of return and reintegration programmes, establish better links with development initiatives and strengthen cooperation with partner countries.
Vice-President for Promoting our European Way of Life, Margaritis Schinas, said: “The EU is building a new ecosystem on returns – looking at increasing cooperation on readmission, improving the governance framework, equipping Frontex with a new operational mandate on returns and appointing an EU Return Coordinator. Today’s Strategy on voluntary returns and reintegration is another piece of that puzzle. Returns are more effective when they are voluntary and accompanied by genuine reintegration options for returnees and this Strategy will develop a more uniform and coordinated approach among Member States to unlock their full potential.”
Commissioner for Home Affairs, Ylva Johansson, said: “Only about a third of people with no right to stay in the EU return to their country of origin and of those who do, fewer than 30% do so voluntarily. Voluntary returns are always the better option: they put the individual at the core, they are more effective and less costly Our first ever strategy on voluntary return and reintegration will help returnees from both the EU and third countries to seize opportunities in their home country, contribute to the development of the community and build trust in our migration system to make it more effective.”
An effective legal and operational framework
Gaps between asylum and return procedures, challenges in preventing absconding, insufficient resources, lack of data, overall fragmentation and limited administrative capacity to follow-up on return decisions all contribute to the low uptake in assisted voluntary returns programmes. Through the proposed recast Return Directive, the amended proposal for an Asylum Procedures Regulation, the Asylum and Migration Management Regulation  and the revised Eurodac Regulation, the Commission will continue to put in place fast and fair common procedures and rules on asylum and return, monitor the granting of return and reintegration assistance and reduce the risk of unauthorised movements. Through its enhanced mandate, Frontex can support Member States in all stages of the voluntary return and reintegration process, including on pre-return counselling, post-arrival support and monitoring the effectiveness of reintegration assistance. The Return Coordinator and High Level Network for Return will provide further technical support to Member States in bringing together different strands of EU return policy.
Improved quality of assisted voluntary return programmes
Providing early, tailor-made and effective return counselling taking into account individual circumstances, the needs of children and vulnerable groups, as well as support after return, improves their chances of successful and sustainable reintegration into their home communities. The Commission will work with Frontex to develop a common curriculum for return counsellors complementing existing support from the Agency and making better use of web-based tools such as the Return and Reintegration Assistance Inventory and the Reintegration Assistance Tool. The Commission, in cooperation with Member States, Frontex and the European Return and Reintegration Network, will also develop a quality framework for reintegration service providers based on common standards for managing projects, supported by EU funding.
Strengthening cooperation with partner countries
Cooperation on voluntary return and reintegration is a key aspect of migration partnerships that the EU will strengthen under the New Pact on Migration and Asylum. The EU will support the ownership of reintegration processes in partner countries with capacity building, providing staff with the necessary skills, or supporting governance structures to cater to the specific economic, social and psychosocial needs of returnees. The EU will also continue to provide assistance for voluntary return and reintegration of migrants stranded in other countries, including through exploring new partnerships. Finally, the EU will strengthen links between reintegration programmes and other relevant development initiatives in partner countries. The Commission will ensure a more coordinated use of the financial resources that will be available under different EU funds to support the entirety of the voluntary return and reintegration process.
Background
Today’s Strategy is part of the EU’s work to build a common EU system for return under the New Pact on Migration and Asylum.
The Strategy is based on the results and experience gained in implementing national programmes and EU-funded initiatives in partner countries, including the work done by the European Return and Reintegration Network, Frontex and the EU–International Organization for Migration Joint Initiative for Migrant Protection and Reintegration.
Compliments of the European Commission.
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In his speech at the Leaders’ Summit on Climate hosted by US President Joe Biden on 22 April, European Council President Charles Michel highlighted the EU’s leadership in fighting climate change and its binding target of 55% emissions reduction by 2030. He also stressed the need for a global approach to carbon pricing and urged all developed countries to scale up their contributions to climate finance.

A global approach to carbon pricing is paramount to promoting green investment. If we want to be at peace with nature, we need to chase carbon from our business model.
President Charles Michel

“Green finance” – Speech by President Charles Michel at the Leaders’ Climate Summit, 22 April 2021

Leaders’ Summit on Climate, 22 April 2021
The objective of this virtual summit was to underscore the urgency – and the economic benefits – of stronger climate action. It was a milestone on the road to the UN climate change conference (COP26) this November in Glasgow, United Kingdom.
The EU was represented by European Council President Charles Michel and European Commission President Ursula von der Leyen. The heads of state or government of EU member states Denmark, France, Germany, Italy, Poland and Spain also attended the event.
EU leaders underlined Europe’s leadership in the fight against climate change which is reinforced by the recent provisional agreement on the EU climate law, paving the way for the continent to become climate neutral by 2050. They sought to convince their international partners to commit to similarly ambitious targets.
This summit was another opportunity to stimulate global efforts to keep the Paris Agreement goal of seeking to limit global warming to 1.5 degrees Celsius within reach. The summit highlighted examples of how enhanced climate ambition will create good-paying jobs, advance innovative technologies, and help vulnerable countries adapt to climate impacts.
The summit date was chosen so as to fall on Earth Day, a global annual event on 22 April to demonstrate support for environmental protection.

Leaders’ Summit on Climate (White House website)
Earth Day (United Nations website)

The EU – a leader in the fight against climate change
In line with its international commitments under the Paris Agreement, the EU set itself a series of ambitious goals in the past years.

Climate change: what the EU is doing (background information)

Achieving climate neutrality by 2050
In December 2019, the European Council endorsed the objective of achieving a climate-neutral EU by 2050. In their conclusions, EU leaders asked the Council to take forward the work on the European Green Deal launched by the European Commission.

European Council, 12-13 December 2019
European Green Deal (background information)
5 facts about the EU’s goal of climate neutrality (visual story)

At least 55% emissions reduction by 2030
Last December, the European Council agreed on a binding EU target of a net domestic reduction of at least 55% by 2030 compared to 1990.
On 21 April, the Council and the Parliament reached a provisional agreement on the European climate law which includes the 2030 target. The law will make the EU’s climate goals a legal obligation, setting the path for the EU to reach its 2050 climate neutrality goal.
Compliments of the European Council.
The post “If we want to be at peace with nature, we need to chase carbon from our business model,” says President Michel first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

EACC New York is inviting the various European countries, member states and non-member states, we work with to share some fun facts about their state with the EACC network. Through this engagement, we hope to showcase their home country’s cultural beauty, economic strengths, and their role in the transatlantic community.

In conjunction with Portugal’s Presidency of the Council of the European Union, we present a profile of the country of PORTUGAL.
A quick fun fact about your country: According to The Global Peace Index, Portugal is the 3rd safest country in the World, the safest in mainland Europe.
What is a famous dish from your Country and do you like it? Do you eat it a lot? Portugal has a very old and rich gastronomy with French and Mediterranean influence, that emphasizes fish, meat, olive oil, bread, tomato, herbs, and spices. Although there are dozens of different traditional dishes, three come to my mind:

Green in color, Caldo Verde is a delicious and hearty soup made with collard greens or kale, combined with potato puree, slices of Portuguese sausage (chouriço) and local olive oil.
Bacalhau, dried and salted codfish, is perhaps the main national dish, although there are more than 365 different ways to cook bacalhau. From grilled, baked, canned, and fried you’ll easily find your eating pleasure.
Pastel de Nata is the iconic and famous Portuguese dessert. It is a sweet and creamy Portuguese egg tart made of flour, butter, eggs, cinnamon and of course sugar. It is so addictive, it might become your daily pastry of choice.

And yes, you can find it in New York….
What is your Country’s strongest connection to NYC? To the US? There has always been a very strong connection between Portugal and the US since the birth of the United States. A few fun, historical facts:

The Independence of the United States was toasted with Madeira wine (Portuguese wine from the Madeira Islands)
In 1791, following the Revolutionary War, Portugal was one of the first countries (the first neutral country) to recognize and establish diplomatic ties with the United States.
The first US Consulate in the world was set up in Madeira.
The oldest continuously operating U.S. Consulate in the world is located in Ponta Delgada on the island of Sao Miguel in the Azores.
One of Jefferson’s best friends was a Portuguese, Abbot Correia da Serra, the only person outside the President’s family to have his own room in Monticello.
Washington counted on Peter Francisco, a man from the Azores, to help him win the war.

Today, Portugal’s strongest connection to the United States is the presence of a sizeable and vibrant Portuguese community, the largest Portuguese diaspora in the world (1.5 million people) which is getting increasingly influential at all levels, mainly in Massachusetts, Rhode Island, New Jersey, California, and Hawaii.
In your view, what is the hottest industry/field in your Country at the moment? There are a few industries that are doing quite well and have been attracting new investments into Portugal in the recent years. Some examples are the aero-spatial industry, life sciences, and automotive (tech solutions for mobility). However, when highlighting the hottest industry, we should mention the Tech Industry which is the one that is attracting more attention and investment from all over the world.
Talent, young and technically savvy workforce, desire to innovate, investment incentives and a remarkably stable political climate, are the reasons mentioned by IT giants such as Google, Microsoft, Cisco, Siemens and others that recently invested in Portugal in tech, with new greenfield investments and/or expansions.
How is your Country attracting foreign business? Portugal has very strong arguments to attract foreign business, in what concerns trade and investment.
The country is an important market for the Automotive Industry, assuring the full value chain, and is a very good location for other traditional industries  such as footwear, clothing, home textiles, and agri-food among others, due to a strong know how and very competitive operational costs.
For the past 5 years Portugal became a hot spot for technology and Centers of Excellence in different fields.  Just to highlight some investments in the automotive tech sector:

BMW, which surveyed close to 100 cities for a new global software engineering hub, selected the northern Portuguese town of Porto, in partnership with Portugal’s Critical Software. “We studied various locations, and in Portugal we found talent — a lot of talent — and a desire to innovate,” said BMW Group Senior Vice President of Electronics Christophe Grote.
Mercedes-Benz is equally effusive about the location for its first Digital Delivery Hub, which it opened in the Portuguese capital in 2017. “Lisbon is establishing itself as the new ‘place to be’ for the digital world: it is precisely here that Mercedes-Benz wishes to drive its future digital transformation from premium automobile manufacturer to premium mobility service provider,” said the German automaker.

With a high qualified workforce –  3rd highest rate of engineering graduates in Europe, #7 Proficiency index 2020 (high proficiency in English) – and a very competitive business climate, Portugal offers an excellent quality of life and is a safe country. We are proud to say that we rank #1 World’s best quality of life for expats and #3 safest country in the world, according to the Global Peace Index.
What is your Country’s most successful export product? The most relevant export products are motor vehicles and automotive components.
What are some best-practice insights for businesses seeking to move/expand into your Country? The entity responsible for the attraction of FDI and promotion of the country is AICEP – The Portuguese Trade and Investment Agency.
AICEP is a “One Stop Shop” public agency, that provides comprehensive and accurate information and data, benchmark reports with other locations; organizes and schedules site visits with local entities, including local authorities, universities, training centers, HR companies and peer companies; provides different site  proposals according to project specifications and helps setting up direct contacts with local entities.
With all these support, foreign companies are able to have a complete overview of the best way to establish a business in Portugal, considering the experience of several players and entities.
After the implementation of the project in the country, AICEP provides “After Care Services”, supporting the companies on all subsequent phases of their operations in Portugal.
What’s the biggest cultural difference you’ve noticed between America and your County? The main cultural difference I have noticed between the United States and Portugal is that life in Portugal goes at a much relaxing pace than in the United States. In Portugal, people tend to be less “fast-food” paced, paying more attention to family and friendship relationships. On the business side, while in the US decisions are made quickly and are almost solely profit oriented, in Portugal the decision process takes longer and a trusting relationship must often be established first.
In the grand scheme, what do strong European-American relationships mean to your country? Being both an Atlantic and a European country, Portugal has always been a strong advocate of an ever closer relationship between the European Union and the United States. That translates into the current Portuguese Presidency of the EU Council’s list of priorities with the strengthening of the transatlantic relationship in all areas being one of our top priorities.
Portugal is particularly well placed to act as bridge-builder between both sides of the Atlantic in what concerns the multiple dimensions of the transatlantic relationship. We have been fulfilling this role with enthusiasm and determination, as recognized by both our American and European partners.
On a bilateral level, Portugal and the United States are more than friends, they are allies: both countries have a long-standing bilateral Defense Agreement, both were founding members of NATO, and the Azores has been hosting an American military base for decades. Portugal and the United States share the same democratic values, they see eye to eye in international relations, and face global challenges together.
This bilateral relation of both countries has been spreading to all sectors of activity, with particular intensity these last few years. In this regard, the figures of the bilateral economic relations speak for themselves: trade – the United States are Portugal’s second most important partner (after the UK) outside the EU; variety of investments; tourism – more than 1,2 million of Americans visited Portugal in 2019, before the pandemic.
Compliments of AICEP Portugal Global – a member of the EACCNY.
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Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the European Statistical Forum (virtual) |

Economic and financial statistics play a central role in guiding monetary policy decisions: central banks constitute an important user group for the output of statistical agencies, while also helping to collect the data underpinning many macro-financial statistical series. Events such as the European Statistical Forum provide a welcome opportunity to bring together the producers and users of statistics.
In my remarks today, I will discuss two main topics: the first topic is the globalisation-related measurement challenges for macroeconomic statistics, with a focus on external and national accounts; the second topic is the data needs exposed by the pandemic crisis.[1],[2] I will highlight some of the ongoing initiatives to address these measurement challenges, and outline some ideas to enhance further the quality of official statistics.
Measurement challenges related to globalisation
The cross-border integration of production – through both the activities of multinational enterprises (MNEs) and the complex production chains that connect firms specialising in different stages of production – has been an important engine of the globalisation of trade, finance and technology.[3] MNEs typically have complex organisational structures made up of interlinked legal entities, including special purpose entities (SPEs).
Transactions by MNEs, which are often made intra-group, are sufficiently large to pose challenges to the interpretation of balance of payments and national accounts statistics. While this is most visible for financial centres and very open small economies where global firms are large relative to the size of the domestic economy, these factors are also increasingly relevant for understanding the macroeconomic statistics of the euro area and other large economies.
Complex cross-border production and ownership arrangements, such as contract manufacturing and merchanting, affect the measurement of the balance of payments and the national accounts through the booking of exports of goods that are neither produced domestically nor cross the border of the domestic economy. Moreover, transfer pricing – the pricing of the various transactions involved in intragroup cross-border production arrangements – substantially affects the amount and location of profits booked.
Over time, the location of corporate structures has become increasingly mobile. This has been partly driven by fiscal and regulatory arbitrage incentives that motivate the re-domiciliation of headquarters and the geographical optimisation of the legal registration of intangible assets such as patents and copyrights. Intellectual property products (IPPs) have a high degree of cross-border fungibility and are of central importance not only for digital companies but also for other industries, such as pharmaceuticals. IPP-related transactions, which primarily reflect the operations of a small number of large companies, have had a marked effect on the services component of the euro area current account balance and were also visible – especially before the pandemic – in the euro area national accounts, where these appear as high imports of services and gross fixed capital formation (Charts 1 and 2).[4]

Chart 1
Euro area services trade balance

(EUR billions)
Source: ECB.
Notes: Quarterly data. The latest observation is for the fourth quarter of 2020.

Chart 2
Euro area national accounts: selected components

(quarter-on-quarter growth rates in percentages)
Source: Eurostat.
Notes: Seasonally and working day adjusted quarterly data. The latest observation is for the fourth quarter of 2020.

This highlights a dichotomy between the residency principle underpinning the macroeconomic statistical framework and the global footprint of MNEs. Data on the numerous entities belonging to MNE groups in different countries are not consolidated in the accounts of the home country of the parent MNE. Instead, these are recorded in the national statistics of the economies where the entities reside, even if their role in domestic economic activity may be quite minor.
This dichotomy also extends to the way statistics are collected and compiled: while companies are global, data are gathered nationally, refer only to the activities of MNEs that are located in the country and are subject to strict data confidentiality rules. While European law enables cross-border data sharing for statistical purposes, this is often prevented or highly circumscribed by national rules. Owing to the decentralised manner of data collection, the information sets for global companies that are available to national statisticians differ across countries, which limits cross-country comparability and overall data quality, including for the euro area. It also enables the emergence of large bilateral asymmetries in the measurement of the same variables, as observed, for example, between the euro area and the United States, but also within the European Union (Chart 3).[5]

Chart 3
Bilateral euro area-US current account

(EUR billions; 2020)
Sources: ECB and US Bureau of Economic Analysis.
Note: Positive balance indicates a surplus for the euro area.

Turning to the financial side of globalisation, indicators of international financial trade increased from the early 1990s until the global financial crisis and have subsequently stabilised since then in proportion to global output (Chart 4). As shown in my work with Gian Maria Milesi-Ferretti, the expansion in external assets was concentrated in positions vis-à-vis international financial centres, which in turn are linked to the corporate structures of MNEs.[6]

Chart 4
Evolution of external assets

(percentages of world GDP)
Sources: External Wealth of Nations database (Lane and Milesi-Ferretti) and ECB staff calculations.
Notes: Aggregates for advanced economies, financial centres and emerging and developing countries are defined as in Lane, P. R. and Milesi-Ferretti, G. M. (2018), “The External Wealth of Nations Revisited: International Financial Integration in the Aftermath of the Global Financial Crisis”, IMF Economic Review, Vol. 66, No 1, International Monetary Fund, pp. 189-222.

Gross foreign direct investment (FDI) transactions of euro area countries with financial centres have been so large that these have driven aggregate euro area developments. Euro area FDI also exhibits a strong correlation between gross assets and liabilities, especially in financial centres, which points to the importance of the pass-through of financial flows for the evolution of FDI data.[7]
The challenge in interpreting headline FDI data is further compounded by the large presence of SPEs in a number of euro area countries. SPEs account for sizeable shares of cross-border financial transactions and positions in FDI. Statistics on SPEs, however, remain underdeveloped, since these do not follow a harmonised international definition and data are systematically collected only for a limited set of countries.
The limitations of cross-border statistics also make it difficult to analyse properly international financial exposures.[8] Although data on international financial transactions and positions have improved significantly over the past decade (in terms of coverage and details available on instruments, sectors and geographic breakdowns), visibility on the links between ultimate investors and ultimate issuers of financial instruments remains limited.[9] The identification of ultimate exposures has been further complicated in recent years by the expansion of international financial intermediation chains, which often involve non-bank entities located in international financial centres.[10] A good example of this is the difficulty in measuring foreign currency exposures in international balance sheets – for which official statistics remain sparse – although research-based datasets have recently made some inroads in this area (Chart 5).[11]

Chart 5
Cumulative distribution of net foreign currency exposures
Source: Bénétrix, A., Gautam, D., Juvenal, L. and Schmitz, M. (2020), op. cit.
Notes: Net foreign currency exposures shown on the horizontal axis range between -1 and 1. The vertical axis presents the cumulative distribution (the proportion of countries) below each value on the horizontal axis for 1997, 2007, 2012 and 2017. The sample includes 50 advanced (ADV) and emerging (EME) countries.

One way of improving consistency across datasets is to integrate sectoral information of the external balance sheet and domestic sectoral data. This was successfully implemented last year at the ECB for the euro area datasets on the balance of payments and the financial sector accounts. In turn, this supports the analysis of interconnectedness and helps to identify the domestic sector imbalances that ultimately drive external imbalances.[12]
Lessons from the pandemic
Let me now turn to the pandemic. A detailed account of the anatomy of the crisis and our policy response is beyond the scope of my remarks today, but I would like to touch upon some of the lessons learnt from the crisis in terms of data needs.
The first point to make is that the availability of high-quality statistics has been invaluable in understanding the propagation of the pandemic shock. Taking the example of balance of payments statistics, these played an important role in understanding the propagation of the pandemic shock, especially through the monthly data releases. Cross-border portfolio investment data revealed a strong initial flight-to-safety dynamic in March 2020, with a basic asymmetry across euro area countries: cross-border investors were net sellers of the bonds of the more vulnerable group of euro area countries and net buyers of the bonds of the less vulnerable group (Charts 6 and 7). Following the decisive policy action in mid-March (especially the announcement of the pandemic emergency purchase programme), the pattern of net selling of debt of the more vulnerable group was still visible but already much less severe, and disappeared in the following months.[13] Further insight into the reallocation decisions of euro area investors was obtained by examining the portfolio shifts in the ECB’s Securities Holdings Statistics (SHS) for the main sectors, which was helped by the advanced releases of SHS data since the start of the pandemic.

Chart 6
Cross-border portfolio investment flows by country group – assets

(monthly flows as a percentage of euro area GDP)
Sources: ECB and Eurostat.
Notes: “Less vulnerable” countries are Belgium, Germany, France, the Netherlands, Austria and Finland; “more vulnerable” countries are Greece, Spain, Italy and Portugal. The averages are computed over the period since January 2008. The latest observation is for February 2021.

Chart 7
Cross-border portfolio investment flows by country group – liabilities

(monthly flows as a percentage of euro area GDP)
Sources: ECB and Eurostat.
Notes: “Less vulnerable” countries are Belgium, Germany, France, the Netherlands, Austria and Finland; “more vulnerable” countries are Greece, Spain, Italy and Portugal. The averages are computed over the period since January 2008. The latest observation is for February 2021.

Nonetheless, the inescapable lags in the compilation and publication of official statistics limit their information value for real-time decision-making, especially in a fast-moving environment. For example, the quarterly sector accounts, which provide a very comprehensive picture of the financial and non-financial linkages in the economy and are extremely valuable in understanding the impact of the pandemic, take about three months to be released. Similarly, although the Harmonised Index of Consumer Prices (HICP) is released with a lag of only 15 days (and a flash estimate is published earlier, on the last day of the month), other important statistics, such as labour market indicators, only become available after a longer period of time and generally do not provide flash estimates.
To address some of the limitations inherent in lagged data releases, we have, among other things, complemented standard labour market data with high-frequency indicators. For instance, hiring rates based on professional network websites were used as indicators for the number of job hires in the euro area, and the number of job postings from internet portals was used as a real-time proxy for changes in labour demand (Chart 8). ECB staff have also used text analysis to construct indicators on job retention schemes during the pandemic. These made it possible to track – almost in real time – the number of applications to job retention schemes by region and industry and to analyse the use of job retention schemes by large firms. In similar vein, high-frequency data on weekly credit card payments can serve as a proxy for retail sales, and the consumption of inputs such as electricity, gas and fuel as a proxy for activity levels.

Chart 8
High-frequency labour market indicators: hiring rate and job postings

Sources: LinkedIn, Indeed and ECB calculations.
Notes: The methodology behind the high-frequency indicators on new hires and job postings is documented in the box entitled “High-frequency data developments in the euro area labour market”, Economic Bulletin, Issue 5, ECB, 2020. The latest observation is for February 2021.

Survey-based information has proven especially useful during the pandemic. In addition to the well-established financial surveys carried out by the ECB (such as the bank lending survey and the survey on the access to finance of enterprises), the qualitative information collected in the regular corporate telephone survey and the rich information contained in the pilot consumer expectations survey have been important in policy-making.
Addressing the measurement challenges
Many of the indicators that we monitor at the ECB are provided by the national statistical institutes and the European Statistical System (ESS). The excellent cooperation between the ESS and the European System of Central Banks (ESCB) during this challenging period has therefore been particularly valuable. This cooperation includes the joint work on methodological clarifications and data in the fields of national accounts and consumer prices and the development a joint Eurostat-ECB reporting template for government interventions and support measures. Similarly, the ESS Recovery Dashboard established by Destatis, Eurostat and the ESS has proven highly useful, both as a communication tool and as a basis for methodological improvements. This initiative also showcases the potential of statistical systems to be agile and innovative, including through the incorporation of non-traditional data sources.
While the measurement challenges that I have laid out are widely recognised and have triggered a number of data initiatives at European and global levels, let me share my wish list for further improvements from a user perspective.[14]
First, at a general level, we could benefit from a more agile statistical system. This pertains to the capability to respond quickly to crises and, more generally, to keep pace with the rapidly evolving global activities of MNEs and financial intermediaries. The use and development of experimental statistics could make an important contribution to boosting agility. Work on variables related to labour market slack, public support measures and business demographics would deserve to be made a particularly high priority.
Second, at a more structural level, a concentric system of statistical and administrative business registers is a promising avenue for reconciling statistical and non-statistical needs. A powerful core element of such a system of registers would be a single (near) real-time EU business register containing non-confidential information. This register could be made available as a public good for all administrative purposes. Establishing such a core register would require a stepwise approach, intensive cooperation among the operators of administrative, statistical and commercial business registers and should draw on the initiatives to enforce the universal use of the legal entity identifier. The register could also support non-statistical tasks, such as those of ECB Banking Supervision or the European Commission.
Additional information could be added in concentric circles around the core business register, starting with the necessary statistical variables, which would be the reference for ESCB and ESS statistical production. More circles could be used to add variables for other administrative purposes, which would also allow for controlled access.
While we can only take some initial steps towards such a system of concentric business registers, we are already in a position to make a start by bringing our registers closer together for statistical purposes. Doing so is challenging in that it certainly requires thinking big, making a sizeable initial investment and using EU law. But it also seems necessary if European statistics are to remain fit for purpose in the digital age.
Third, an urgent review of the EU data confidentiality framework is central to improving the quality and value of our official statistics. While the exchange of confidential information for statistical purposes is already possible under EU statistical law, the experience of the last decade shows that more is needed in a number of Member States.[15] It follows that the sharing of confidential data for statistical purposes within the ESCB/ESS should be made easier. This can be achieved by creating an improved legal basis, by narrowing the rather broad definition of confidentiality and by replacing some enabling clauses with mandatory ones.
Fourth, it is important for European statistics compilers to have better access for statistical purposes to privately held data which are of public interest. This is in line with the European strategy for data, and the forthcoming Data Act aims to support business-to-business data sharing and facilitate access to data held by private sector entities, if these data are of public interest.
Fifth, given the importance of MNEs and the measurement challenges I mentioned before, establishing a centralised collection of data on MNEs would make a vital contribution to the availability and quality of European data.[16] By way of comparison, for the financial sector data are already collected for the 115 significant and around 2,400 less significant banks within the framework of banking supervision. Collecting such data for MNEs could focus on the 500 largest MNEs operating in the EU and be made accessible to the relevant statistical authorities. This has the potential to eliminate information gaps and overlaps across countries and ensure a more timely, complete and consistent cross-country recording of the activities of MNEs. It would also help to improve our understanding of global value chains, for example with regard to information on concentration and bottlenecks. A coordinated approach across the EU could be a win-win situation, as it would reduce the statistical reporting burden of MNEs by removing the need to fill in questionnaires from 27 Member States in more than 20 languages.
Sixth, further sectoral detail is needed to allow for an adequate analysis of risk exposures and account for the activities of purely internationally oriented entities. To this end, the ESCB feasibility study on establishing new data for foreign-controlled corporations in the balance of payments and the financial sector accounts is very welcome. Ideally, such data would be available for both financial and non-financial accounts. With regard to the need for a harmonised recording of SPEs in cross-border statistics, the definition provided by the dedicated task force of the IMF Committee on Balance of Payments Statistics and the provision of operational recording guidance are welcome steps. These developments will be helpful in ensuring the availability of internationally consistent statistics, with a separate breakdown for SPEs in due course. Within the EU, other important initiatives include the Early Warning System on large corporate events and the Asymmetry Resolution Meetings, which the ECB and Eurostat have set up as part of the regular statistical production rounds to reduce bilateral asymmetries in the measurement of foreign direct investment.
Seventh, I would like to take this opportunity to highlight the importance of climate change as a fledgling field for macroeconomic statistics. To support the transition to a more sustainable economy, there is a basic requirement for official statistics to be made available to meet the growing demand for underlying data and indicators to assess the social and economic impact of climate change and monitor the financial vulnerabilities stemming from physical and transitional risks. The close links between the financial and non-financial dimensions in this field make a collaborative approach particularly important.
Finally, taking a longer time horizon into consideration, the ongoing review and update of the international statistical manuals (in particular the Balance of Payments Manual and the System of National Accounts) offers an opportunity to rethink the key concepts of macroeconomic statistics. One avenue is the consolidated framework, in which all entities belonging to a corporate group are assigned to the country of the headquarters. Such an approach has the potential to provide a useful alternative perspective, particularly on MNEs and in the identification of ultimate financial exposures. At the same time, such a consolidated accounting framework should complement rather than replace the residence-based framework, as both approaches offer specific advantages depending on the purpose at hand.
Conclusions
In conclusion, globalisation and the pandemic have both brought to the fore major measurement challenges for macroeconomic statistics. On the real side, globalisation-related measurement issues are affecting the analytical value of the statistics on balance of payments and national accounts. On the financial side, the key issues relate to the changing nature of FDI and to the proper measurement of financial exposures and risks.
The pandemic has further highlighted the value of high-frequency data for real-time decision-making. However, the statistical response to the pandemic has also demonstrated that the statistical system can respond in an agile and effective manner through cooperation and mutual assistance. A key lesson here is that access to privately held data can advance official statistics in a relevant way.
As reflected in the ongoing initiatives to address measurement challenges at both the European and the global level, substantial further efforts are needed to improve the analytical value of key macroeconomic statistics. Facilitating the sharing of confidential data for statistical purposes across borders and exploring avenues to collect data on large internationally active institutions in a centralised way at the European level are high priorities.
As a long-standing user of macroeconomic statistics, I look forward to today’s discussion and will closely follow the joint efforts to further enhance the availability and quality of European statistics.

Compliments of the European Central Bank.
The post ECB Speech | Maximising the value of statistics first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Welcome address by Fabio Panetta, Member of the Executive Board of the ECB, at the joint BIS, BoE, ECB and IMF conference on “Spillovers in a “post-pandemic, low-for-long” world” |
Thank you very much for the opportunity to speak at this conference on spillovers in a “post-pandemic, low-for-long” world.[1]
Over the last decade, globalisation has called into question central banks’ ability to achieve domestic objectives. According to some[2], close economic and financial ties across borders make inflation more of a global phenomenon than a domestic one. And spillovers would leave central banks less able to control domestic financing conditions.
Today, these views are being put to the test.
US authorities are engaging in unprecedented fiscal and monetary expansion, which will show whether forceful policy stimulus can still raise inflation. The associated improvement in the US and global economic outlook has generated upward pressures on sovereign bond yields, which central banks whose economies are less advanced in the recovery are striving to resist. Whether they succeed will reveal the scope of monetary autonomy in a globalised world.
What will the outcome be? For smaller and emerging market economies, the constraints on policy may remain significant. But I expect this episode to confirm that globalisation cannot constrain monetary policy in large economies, like the euro area.
How globalisation affects both inflation and financing conditions in the euro area depends on our policy response to it. If globalisation leads to below-target inflation, it is because we are tolerating that undershooting.
The euro area has monetary autonomy – the only question is how to use it wisely.
Faced with uncertainty about the true economic damage caused by the pandemic, we must preserve accommodative financing conditions well into the recovery. Better still, monetary and fiscal policies should work together to deliver a stronger and more inclusive recovery, reducing the risk of inflation undershooting our aim for a prolonged period. This is the best way to avoid lasting scars.
Globalisation and inflation
Let me start by discussing the role of globalisation in inflation outcomes.
Inflation has a common global component, which is largely driven by energy and commodity prices. But the view that globalisation makes inflation a global phenomenon – and a disinflationary one – goes further.[3]
Trade integration might cause disinflation through lower import prices, lower production costs and the forced exit of less productive domestic producers.[4] By increasing global labour supply, it might have created “global slack”.[5] And growing international competition could limit the scope for firms to pass on domestic cost increases to consumers.[6]
These forces, especially commodity price shocks, can have sizeable effects on price developments. But the evidence suggests that globalisation has only marginal effects on trend inflation.[7]
While inflation has fallen across advanced economies over recent decades, its correlation with the pace of globalisation is weak. The sharpest reductions took place in the early 1980s, before globalisation took off (Chart 1). Since the 1990s, inflation has fallen fastest in two periods when trade integration was less intense.[8]

Chart 1
Median inflation rates in advanced economies and KOF Globalisation Index[9]

(left-hand scale: index; right-hand scale: annual percentage changes)
Sources: ECB staff calculations, KOF Swiss Economic Institute and national sources.
Notes: Headline median inflation of 22 OECD countries and KOF overall globalisation index. The latest observation is for 2018.

Similarly, global economic slack has little impact on domestic inflation or the slope of the Phillips curve.[10] And there is little evidence that the role of global factors has increased for core inflation over the last decade.[11] Consistent with this observation, euro area core inflation since the global financial crisis has been driven mainly by services (Chart 2, left panel), the inflation component that is most sensitive to the domestic output gap (Chart 2, right panel).[12]

Chart 2
Services price inflation and slack

(left panel: percentage points, rebased to January 2008 (= 1.74); right panel: sum of 2021 HICP weights)
Sources: Eurostat and ECB staff calculations.

Insofar as globalisation has influenced inflation in the euro area, it may rather be the result of macroeconomic policy choices.
From 1999 onwards, globalisation led to a stronger rise in trade openness in the euro area than in other large economies like the United States (Chart 3, left panel). This, in turn, created more opportunities for euro area economies to “rotate” demand to foreign markets when internal demand stalled. The result, especially in the wake of the global financial crisis, was a shift from domestic to external demand by the euro area as a whole. This led to a large current account surplus (Chart 3, right panel), while the protracted weakness in internal demand weighed down on inflation (Chart 4).[13]

Chart 3
Europe’s response to globalisation

(left panel: (exports + imports)/GDP; right panel: percentages of GDP)
Sources: National accounts and Ameco.

In fact, underlying inflation[14] in the period before the financial crisis had approached 2% only because domestic demand in “non-core” countries had pushed it higher, while “core” countries had lower demand and inflation (Chart 4, left panel). But after the crisis, lower domestic demand in “non-core” countries was not offset by higher domestic demand in core countries. Rather, domestic demand fell everywhere, which contributed to underlying inflation being compressed (Chart 4, right panel).

Chart 4
Domestic demand and core inflation in the euro area

(left panel: percentages of GDP; right panel: percentages per annum, HICP excluding food and energy)
Sources: ECB and Eurostat.
Note: Non-core refers to Spain, Italy, Greece, Portugal and Cyprus.

This fall in underlying inflation was not visible to the same extent in the United States, which relied more on internal demand.[15] In fact, the United States entered the global financial crisis with underlying inflation having averaged 2.2% over the previous decade, and after 2012 it was 0.2 percentage points lower on average. The euro area, meanwhile, entered the crisis with underlying inflation averaging 1.7% and, after the sovereign debt crisis, it was 0.6 percentage points lower on average (Chart 5).

Chart 5
Core inflation

(year-on-year percentage changes)
Sources: Eurostat and Federal Reserve.
Note: Dashed lines denote period averages.

Globalisation and policy autonomy
If globalisation does not directly lead to low inflation in the euro area, can it constrain the ability of monetary policy to influence the inflation process? This could happen through two channels.
First, globalisation could depress the natural rate of interest and make it harder for monetary policy to stoke price pressures, especially at the lower bound. That could happen if trade and financial integration increase global demand for safe assets.[16] Globalisation might also favour “winner-takes-all” markets that stifle productivity growth and put downward pressure on the natural rate.[17]
But the evidence about the importance of global factors in explaining the decline of the natural rate is inconclusive at best.[18] There is a stronger consensus that demographics have been the key common driver.[19]
Second, globalisation could constrain monetary autonomy by increasing exposure to financial spillovers, making it harder for central banks to set financing conditions at the appropriate level to stabilise domestic inflation. Evidence suggests that a “global financial cycle”[20] does exist, driven by international risk factors, and that financial spillovers from the United States to the euro area have been increasing since the 1990s.[21]
In particular, since the mid-2000s euro area term premia have become more responsive to global factors (Chart 6). This matters because central bank asset purchases that aim to lower market yields work mainly by compressing term premia. If those premia are simultaneously rising on account of external spillovers, this could weaken the traction of monetary policy over euro area yields.

Chart 6
Share of term premium movements driven by foreign spillovers

(percentages)
Sources: Haver and ECB staff calculations.
Notes: The estimation builds on the methodology proposed by Nyholm (2016), Diebold and Yilmaz (2009) and Diebold and Yilmaz (2016). A 250-day rolling window VAR(4) including inflation expectations and inflation risk premia for G4 markets is estimated, where these estimates are calculated using the model framework of D’amico, Kim and Wei (2018). Generalised impulse response functions (Pesaran and Shin (1998)) allowing for correlated shocks are used to estimate the variance decomposition of the forecast error with a ten-day horizon, which in turn is used to compute spillover indices. The latest observation is for 20 April 2021.

But in practice globalisation does not seem to impose an insurmountable constraint on the ECB’s monetary policy. Even when economic conditions in the United States have diverged from those in the euro area, the decisive action we have taken at the ECB has allowed us to deliver financing conditions appropriate for our economic cycle, decoupling from those in the United States.[22]
Indeed, when the ECB introduced forward guidance and asset purchases between 2013 and 2015, the correlation between US and euro area financing conditions weakened significantly (Chart 7, left panel). And in recent months, euro area yields have decoupled from those in the United States (Chart 7, right panel).[23] This reflects the ECB’s commitment to preserve favourable financing conditions, which was behind our decision in March to significantly increase the pace of our asset purchases.

Chart 7
Insulating financing conditions

(top panel: correlation coefficient; bottom panel: basis points)
Five-year rolling correlation between United States and euro area FCIs

Change in nominal and real ten-year yields since January 2021 and March Governing Council meeting
Sources: Refinitiv, Bloomberg Finance L.P. and ECB staff calculations.
Notes: Left panel: Original data at daily frequency collapsed to monthly averages. X-axis displays end date of five-year rolling window. Right panel: The cut-off date for the March Governing Council meeting was 9 March 2021.The latest observation is for 23 April 2021.

Asserting policy autonomy
So we do have policy autonomy in the euro area. In the face of two key facts, we should use it to shelter the domestic recovery from adverse foreign spillovers.
First, the recovery remains dependent on policy support. For example, job retention schemes are playing a major role in cushioning unemployment: the share of workers who are unemployed, discouraged or enrolled in such schemes is around double the headline unemployment rate (Chart 8, left panel). And €420 billion in guaranteed loans are still outstanding in the largest economies (Chart 8, right panel).

Chart 8
Policy support from job retention schemes and loan guarantees

(left panel: percentage of labour force; right panel: EUR billions)
Sources: Eurostat, March 2021 ECB staff macroeconomic projections for the euro area, and ECB staff calculations (left panel); Kreditanstalt für Wiederaufbau for Germany, Instituto de Crédito Oficial for Spain, Ministère de l’Économie et des Finances for France, Ministero dell’Economia e delle Finanze and Banca d’Italia for Italy and ECB calculations (right panel).
Notes: In the left panel, the unemployment rate in Q1 2021 is the average in January and February 2021 (latest observation). The quarterly labour force in Q1 2021 is based on the March 2021 MPE. The number of job retention schemes is up to March 2021 as collected by ECB staff from national employment and social security agencies for the four largest euro area countries. Discouraged workers are approximated with those leaving the labour force in Q1 2021. In the right panel, the data on the take-up of guaranteed loans are for the period between April 2020 and March 2021. In the absence of a breakdown by firm size for Italy, it is assumed that guaranteed loans to SMEs are those granted via the Fondo di Garanzia, while guaranteed loans to large firms are those granted via SACE (the Italian export credit agency). The latest observation is for Q1 2021.

This policy dependence masks the true underlying state of the economy – particularly in terms of labour market scarring and corporate vulnerabilities – and therefore its resilience to less expansionary policies. The recovery will need to be well advanced before we can get a clear picture of the underlying damage.
Second, even with the ongoing monetary and fiscal policy support, our recovery is expected to be slow and incomplete in terms of both growth and inflation. In fact, the euro area economy is projected to return to its pre-crisis GDP level only in the middle of 2022 and to remain below its pre-crisis trend (Chart 9, left panel).[24] GDP in the United States, in contrast, is projected to recover both its pre-crisis level this year and its trend thereafter (Chart 9, right panel). The euro area and Japan are the only major advanced economies where inflation is projected to remain subdued over the medium term.

Chart 9
Diverging recoveries

(index: 2019 = 100)
Sources: ECB and Federal Reserve.

This evidence suggests that we should avoid withdrawing policy support – either deliberately or by tolerating adverse spillovers – until the output gap is closed and we see inflation sustainably back at 2%.
For the ECB, this implies that we will have to maintain very favourable financing conditions well beyond the end of the pandemic period. The need for very accommodative policy over a longer period should in any case be uncontroversial, given that inflation remains well below our aim in our projection horizon and, according to survey measures of inflation expectations, even beyond it.
Towards more ambitious goals
As I have made clear, Europe has the capacity to overcome the pandemic and its economic consequences. So we face an important decision. We can act as a group of small, open economies, as we did after the global financial crisis, with each country competing to capture external demand. Or we can behave how a large economy would, with European and national policymakers working together to raise internal demand through adequate policy stimulus.
At this point in time, failure to pursue the latter option – reconnecting to the pre-crisis growth path and restoring healthy inflation levels – would increase the danger of the pandemic causing lasting damage to our economy. Three risks stand out.
The first risk relates to the record high levels of public and private debt reached during the pandemic, which make debt dynamics more sensitive to inflation undershooting.
An accounting exercise indicates that if euro area inflation were to undershoot our baseline by 1 percentage point each year for five years, the private debt ratio would increase by around 7 percentage points. This is equivalent to firms and households taking on €900 billion in extra debt at a time when debt needs to be reduced.[25] That could depress investment and consumption and further reduce inflation.
For governments, a similar exercise implies a 5 percentage point increase in the public debt ratio compared with the baseline over five years, and a 10 percentage point increase over ten years.[26] And for countries facing debt-to-GDP ratios of around 150%, ten years of inflation undershooting could increase their debt ratio by approximately 15 percentage points. This is the opposite of what we need at a time when interest rates are near the lower bound and fiscal policy is a transmission channel of monetary policy.
The second risk comes from the inequality that will likely result from the outsized impact of the pandemic on less advantaged groups.
These groups typically have a higher propensity to consume, so a fall in their share of labour income would hold back domestic demand and inflation. Moreover, if they cannot reintegrate into the labour market we could see long-lasting effects, including a permanent loss of human capital.[27] The best way to achieve that reintegration and contain scarring is through faster growth.
Getting back to our pre-crisis growth path would imply a 3% increase in GDP by 2022[28], which estimates suggest would create millions of new jobs.[29] That, in turn, would lead more quickly to tightness in the labour market, supporting wage growth and the return of inflation to our aim.
It would also boost the life chances of the poorest members of society. For example, a 1 percentage point narrowing of the overall unemployment gap in the euro area reduces the unemployment rate of ‘low-skilled’ workers by 1.3 percentage points more than the unemployment rate of ‘high-skilled’ workers.[30] Vibrant labour markets are the most effective way to support those who have lost the most from the pandemic and to reduce inequality.
The third risk is that persistently weak economic activity can reduce productivity.[31] Long periods of inactivity may hurt labour productivity through the loss of on-the-job knowledge. And weaker sales expectations may lead to firms investing less in capacity.[32]
With these risks in mind, it makes sense for the euro area to take advantage of the favourable financing conditions created by monetary policy to launch a stronger fiscal stimulus in order to rapidly return growth to its pre-pandemic path. The focus must be on productive investment, so that spending is concentrated on projects with high multipliers.
The additional investment required is well within our reach. According to simple, illustrative estimates, extra spending[33] on productive investment of around 2.8% of GDP[34] would be sufficient to reconnect with the pre-crisis growth trend by 2022 (Chart 10).

Chart 10
Euro area real GDP: reconnecting with the pre-crisis trend

(index: 2019 = 100)
Source: ECB illustrative calculations.

Conclusion
My main message today is that Europe’s economic trajectory is in our hands. The inflation process is still a domestic phenomenon which forceful monetary policy can control. The ECB has already asserted its monetary autonomy and will continue to use it to bring inflation back to our aim of 2%.
This, in turn, enables fiscal authorities to use the space available to them to bring about a full recovery, which would guarantee higher productivity, more sustainable debt and more inclusive growth.
Compliments of the European Central Bank.
The post ECB Speech | Monetary autonomy in a globalised world first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Speech on 20 April 2021 in Brussels by President von der Leyen | “Check against delivery”

Prime Minister Draghi, dear Mario,
Ladies and Gentlemen,
Thank you very much for joining us from all the different places!
We are in this together!
And we have to work together – because, as we all know, no one is safe until everyone is safe. We have to join forces to fight this pandemic from every angle and to recover sustainably. This is true for health authorities and all levels of government. It is true for scientists, universities and pharmaceutical companies. And it is of course true for civil society: NGOs and foundations, philanthropists and international institutions. People like you. People who are dealing with global health challenges on a daily basis.
This pandemic has shown to us that health is a true global public good. This is why the Italian G20 presidency and the European Commission decided to host a Global Health Summit on May 21st in Rome. And this is why we want to hear from YOU before we discuss how to prevent future crises, how to prepare better and how to become more resilient in an era of pandemics.
There are important questions to address: What is needed to ensure effective multilateral cooperation when responding to a global health crisis? What can we do to ensure that ALL countries, big or small, with high or with low income, have the necessary capacities to tackle the next crisis? And, last but not least: how can we mobilize the necessary resources on a global level?
Billions of people around the world urgently wait for answers. Not only to fight this pandemic. But also to be better prepared for the next one.
In the European Union we have started to prepare while also drawing our lessons. With our Hera Incubator, we want to get ahead of the curve in the next phase of the virus. For example, by boosting even further our production capacity in Europe.
Not only for Europe, but also for the world. Just as we are doing right now – with vaccines that are being delivered to Europe, and vaccines being exported around the world. We are accelerating the development of vaccines. Therefore we are stepping up research and data exchange between science and industry. And we are speeding up the approval procedures. Because as in any crisis time is of the essence.
It’s important, that we all learn from each other. Our joint ambition must be to achieve the same level of preparedness at a global level.
This is why we need your input.
Your ideas, your expertise and your passion.
Therefore, once again: I am excited to have you all with us today.
Thank you so much for joining, and I am looking forward to your contribution!
Compliments of the European Commission.

The post Opening remarks by President von der Leyen at the civil society consultation ahead of the Global Health Summit first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

As Prepared for Delivery on April 22, 2021 by Kristalina Georgieva |
Mr. President,
Special Envoy Kerry,
Secretary Yellen,
At the IMF we look at climate change as central in our work on macroeconomic and financial stability, growth and employment.  It presents huge risks to the functioning of our economies and offers incredible opportunities for transformative investments and green jobs.
Let me focus on three areas where the right policies can make a significant difference in accelerating the transition to the new climate economy.
First, a robust price on carbon: it provides a critical market signal to producers and consumers in all sectors of the economy.  It has proven to advance investments in renewable energy, electric mobility, energy efficient buildings, reforestation and other climate friendly activities — with positive impact on growth and jobs, while reducing carbon emissions.  Carbon revenues can also help secure a just transition, compensating households for price increases and helping businesses and workers move from high to low carbon intensity activities.
Our analysis shows that without it, we will not reach our climate stabilization goals. It also shows that a mix of steadily rising carbon prices and green infrastructure investment could increase global GDP by more than 0.7 percent per year over the next 15 years—and create millions of new jobs.
Carbon pricing is gaining momentum. Many businesses now use a shadow carbon price in their models. Over 60 pricing schemes have been implemented. But the average global price is currently $2 a ton, and needs to rise to $75 a ton by 2030 to curb emissions in line with the goals of the Paris Agreement.
Because of the urgency to act we propose an international carbon price floor among large emitters, such as the G20. Focus on a minimum carbon price among a small group of large emitters could facilitate an agreement, covering up to 80 percent of global emissions.
Such a price floor has to be pragmatic and equitable, with differentiated pricing for countries at different levels of economic development. And it can be implemented through carbon taxes, carbon trading systems, or equivalent measures that match local policy preferences.
Crucially, a price floor could avoid less efficient and contentious border carbon adjustments if some countries move ahead with robust pricing while others do not.
Second, green taxonomy and standardized reporting of  climate related financial risks.  Both are necessary to unlock trillions of dollars in private finance.
The financial industry is already stepping up, but in a recent survey of major investors more than half cited the poor quality or availability of data as the biggest barrier to sustainable investing. That is why the IMF is working with our members and partners on data quality and disclosure, as well as on financial sector stress testing for climate-related risks.
The third area is financial support to developing countries.
They offer many of the lowest-cost opportunities—so it’s in everyone’s interest to fulfill the commitment of $100 billion a year in climate finance for the developing world. Combined with technology transfer and policy support it will make it possible to decouple growth and carbon emissions.
We will play our part, integrating climate change into our annual economic ‘health checks’ of countries and financial systems and actively promoting low carbon and climate resilient growth paths.
Compliments of the IMF.
The post IMF Managing Director’s intervention at the Leaders Summit on Climate, Session 2: Investing in Climate Solutions first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Introductory remarks by Christine Lagarde, President of the ECB, Frankfurt am Main, 22 April 2021 |
Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of the meeting of the Governing Council.
While the recovery in global demand and the sizeable fiscal stimulus are supporting global and euro area activity, the near-term economic outlook remains clouded by uncertainty about the resurgence of the pandemic and the roll-out of vaccination campaigns. Persistently high rates of coronavirus (COVID-19) infection and the associated extension and tightening of containment measures continue to constrain economic activity in the short term. Looking ahead, progress with vaccination campaigns and the envisaged gradual relaxation of containment measures underpin the expectation of a firm rebound in economic activity in the course of 2021. Inflation has picked up over recent months on account of some idiosyncratic and temporary factors and an increase in energy price inflation. At the same time, underlying price pressures remain subdued in the context of significant economic slack and still weak demand.
Preserving favourable financing conditions over the pandemic period remains essential to reduce uncertainty and bolster confidence, thereby underpinning economic activity and safeguarding medium-term price stability. Euro area financing conditions have remained broadly stable recently after the increase in market interest rates earlier in the year, but risks to wider financing conditions remain. Against this background, the Governing Council decided to reconfirm its very accommodative monetary policy stance.
We will keep the key ECB interest rates unchanged. We expect them to remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 per cent within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
We will continue to conduct net asset purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,850 billion until at least the end of March 2022 and, in any case, until the Governing Council judges that the coronavirus crisis phase is over. Since the incoming information confirmed the joint assessment of financing conditions and the inflation outlook carried out at the March monetary policy meeting, the Governing Council expects purchases under the PEPP over the current quarter to continue to be conducted at a significantly higher pace than during the first months of the year.
We will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation. In addition, the flexibility of purchases over time, across asset classes and among jurisdictions will continue to support the smooth transmission of monetary policy. If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.
We will continue to reinvest the principal payments from maturing securities purchased under the PEPP until at least the end of 2023. In any case, the future roll-off of the PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance.
Net purchases under our asset purchase programme (APP) will continue at a monthly pace of €20 billion. We continue to expect monthly net asset purchases under the APP to run for as long as necessary to reinforce the accommodative impact of our policy rates, and to end shortly before we start raising the key ECB interest rates.
We also intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when we start raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
Finally, we will continue to provide ample liquidity through our refinancing operations. In particular, the latest operation in the third series of targeted longer-term refinancing operations (TLTRO III) has registered a high take-up of funds. The funding obtained through TLTRO III plays a crucial role in supporting bank lending to firms and households.
These measures help to preserve favourable financing conditions for all sectors of the economy and thereby underpin economic activity and safeguard medium-term price stability. We will also continue to monitor developments in the exchange rate with regard to their possible implications for the medium-term inflation outlook. We stand ready to adjust all of our instruments, as appropriate, to ensure that inflation moves towards our aim in a sustained manner, in line with our commitment to symmetry.
Let me now explain our assessment in greater detail, starting with the economic analysis. Euro area real GDP declined by 0.7 per cent in the fourth quarter of 2020 to stand 4.9 per cent below its pre-pandemic level one year earlier. Incoming economic data, surveys and high-frequency indicators suggest that economic activity may have contracted again in the first quarter of this year, but point to a resumption of growth in the second quarter.
Business surveys indicate that the manufacturing sector continues to recover, supported by solid global demand. At the same time, restrictions on mobility and social interaction still limit activity in the services sector, although there are signs of a bottoming-out. Fiscal policy measures continue to support households and firms, but consumers remain cautious in view of the pandemic and its impact on employment and earnings. Despite weaker corporate balance sheets and elevated uncertainty about the economic outlook, business investment has shown resilience.
Looking ahead, the progress with vaccination campaigns, which should allow for a gradual relaxation of containment measures, should pave the way for a firm rebound in economic activity in the course of 2021. Over the medium term the recovery of the euro area economy is expected to be driven by a recovery in domestic and global demand, supported by favourable financing conditions and fiscal stimulus.
Overall, while the risks surrounding the euro area growth outlook over the near term continue to be on the downside, medium-term risks remain more balanced. On the one hand, better prospects for global demand – bolstered by the sizeable fiscal stimulus – and the progress with vaccination campaigns are encouraging. On the other hand, the ongoing pandemic, including the spread of virus mutations, and its implications for economic and financial conditions continue to be sources of downside risk.
Euro area annual inflation increased to 1.3% in March 2021, from 0.9% in February, on account of a strong increase in energy price inflation that reflected both a sizeable upward base effect and a month-on-month increase. This increase more than offset decreases in food price inflation and in HICP inflation excluding energy and food. Headline inflation is likely to increase further in the coming months, but some volatility is expected throughout the year reflecting the changing dynamics of idiosyncratic and temporary factors. These factors can be expected to fade out of annual inflation rates early next year. Underlying price pressures are expected to increase somewhat this year, owing to short-term supply constraints and the recovery in domestic demand, although they remain subdued overall, in part reflecting low wage pressures, in the context of economic slack, and the appreciation of the euro exchange rate. Once the impact of the pandemic fades, the unwinding of the high level of slack, supported by accommodative fiscal and monetary policies, will contribute to a gradual increase in inflation over the medium term. Survey-based measures and market-based indicators of longer-term inflation expectations remain at subdued levels, although market-based indicators have continued their gradual increase.
Turning to the monetary analysis, the annual growth rate of broad money (M3) stood at 12.3 per cent in February 2021, after 12.5 per cent in January. Strong money growth continued to be supported by the ongoing asset purchases by the Eurosystem, as the largest source of money creation. The narrow monetary aggregate M1 has remained the main contributor to broad money growth, consistent with a still heightened preference for liquidity in the money-holding sector and a low opportunity cost of holding the most liquid forms of money.
Overall, lending to the private sector remained broadly unchanged. The monthly lending flow to non-financial corporations showed a modest pick-up in February compared with the previous month. This was also reflected in a slightly higher annual growth rate of 7.1 per cent, after 6.9 per cent in January. Monthly lending flows to households continued to be solid with the annual growth rate of loans to households remaining unchanged at 3.0 per cent in February. The latest euro area bank lending survey for the first quarter of 2021 reports a moderate tightening of credit standards for loans to firms, following more significant tightening in the previous two quarters. Heightened risk perceptions among banks were again the main contributor to the tightening, although their impact was less pronounced than in previous survey rounds. Surveyed banks also reported a renewed fall in demand for loans to firms, mainly driven by a continued decline in demand for financing for fixed investment. With regard to lending to households, the survey indicated lower demand for loans for house purchase, while the credit standards for these loans eased slightly, supported by competition among lenders.
Overall, our policy measures, together with the measures adopted by national governments and other European institutions, remain essential to support bank lending conditions and access to financing, in particular for those most affected by the pandemic.
To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed that an ample degree of monetary accommodation is necessary to support economic activity and the robust convergence of inflation to levels that are below, but close to, 2 per cent over the medium term.
Regarding fiscal policies, an ambitious and coordinated fiscal stance remains crucial, as premature withdrawal of fiscal support would risk delaying the recovery and amplifying the longer-term scarring effects. National fiscal policies should thus continue to provide critical and timely support to the firms and households most exposed to the ongoing pandemic and the associated containment measures. At the same time, fiscal measures taken in response to the pandemic emergency should, as much as possible, remain temporary and targeted in nature to address vulnerabilities effectively and to support a swift recovery of the euro area economy. The three safety nets endorsed by the European Council for workers, businesses and governments provide important funding support.
The Governing Council reiterates the key role of the Next Generation EU package and the urgency of it becoming operational without delay. It calls on Member States to ensure a timely ratification of the Own Resources Decision, to finalise their recovery and resilience plans promptly and to deploy the funds for productive public spending, accompanied by productivity-enhancing structural policies. This would allow the Next Generation EU programme to contribute to a faster, stronger and more uniform recovery and would increase economic resilience and the growth potential of Member States’ economies, thereby supporting the effectiveness of monetary policy in the euro area. Such structural policies are particularly important in improving economic structures and institutions and in accelerating the green and digital transitions.
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