ECB’s Elderson: Central Banks Need Deeper Understanding of Supply Side

12 April 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Executive Board member Frank Elderson on Friday said that central banks needed to understand the economy's supply side better.

Speaking at the Delphi Economic Forum IX in Greece, Elderson said, ‘[T]o properly assess the state of the economy and identify risks, central banks and supervisors need to further deepen their understanding of the supply side of the economy, just as we had to do after the pandemic and the energy crisis.’

The proper functioning of markets had a direct impact on the effectiveness and efficiency of monetary policy, he said. ‘This holds true in terms of both our ability to maintain price stability and the need to avoid the risk of our monetary policy impulses unduly contributing to a misallocation of resources.’

Governments and policy makers should spare no effort in working towards the goals of the Paris Agreement, he urged.

‘Analysis by the ECB and other central banks and supervisors repeatedly shows that, from an economic perspective, an orderly transition is by far preferable to alternative scenarios of doing nothing or doing too little too late’, he said.

There was an ‘urgent need’ to complete the banking union and the capital markets union, ‘irrespective of the climate and nature scenario that ultimately materialises’, he said.