ECB’s Lane: Digitalisation, Carbon Transition of First-Order Importance to Central Banks

24 September 2021

By David Barwick – FRANKFURT (Econostream) – Digitalisation and the shift to greener economies would strongly affect growth and inflation and are therefore of great interest to monetary policymakers, European Central Bank Chief Economist Philip Lane said on Friday.

In a panel contribution to a research seminar organised by the European Stability Mechanism, Lane said that ‘[s]tructural changes (especially digitalisation and the carbon transition) can be expected to be highly influential in driving macroeconomic outcomes over the next decade and are of first-order importance for central banks.’

These structural changes had to be monitored and their growth and inflation implications assessed, he said.

‘The direct and indirect effects of digitalisation and the carbon transition on the financial system and the drivers of the equilibrium real interest rate also warrant intensive study, especially in view of the possible implications for the monetary transmission mechanism’, he said.

The uncertainties of structural change ‘reinforce the value of a stability-oriented approach to the conduct of monetary policy’, he said. A clearly anchored monetary policy frees up economic agents to deal with the changes in the knowledge that monetary will act predictably, he said.

‘Although the precise design and calibration of our policy instruments will surely be influenced by these structural forces in the coming years, the policy goal will remain the same: protecting price stability by focusing on the symmetric 2% inflation target’, he said.

‘In turn, our recent comprehensive strategy review has given us very strong foundations for ensuring that the conduct of monetary policy will take into account the economic, monetary and financial implications of digitalisation and the carbon transition.’