On 30 September, the Florence School of Banking and Finance in collaboration with ‘CESIFIN Alberto Predieri’ Foundation of the Cassa di Risparmio di Firenze organised a conference on ‘The multiple role of Central Banks: The new frontiers of monetary policy’.
The opening remarks by Giuseppe Morbidelli (President of Fondazione CESIFIN ‘Alberto Predieri’), Renaud Dehousse (President of the European University Institute - EUI) and Thorsten Beck (Director of the Florence School of Banking and Finance - FBF), highlighted the importance of the well-established partnership between the EUI and the Cassa di Risparmio di Firenze that resumed its annual policy dialogue appointments after the forced COVID-19 pandemic break.
The event focussed on the current change in the macroeconomic scenario and outlook, going from a favourable economic trend created by the policy in support of the COVID-19 health crisis to the increasing inflation and negative projection generated from the current geopolitical tension created by the war in Ukraine.
The panel discussion moderated by Alessandro Petretto (CESIFIN) reverted on three main questions: How can the transition from fiscal dominance to monetary dominance be smoothen? How central banks should incorporate climate risks among their objectives? How could the creation of a digital EURO limit the risks of financial instability arisen by the existence of crypto values?
Giancarlo Corsetti (Robert Schuman Centre, EUI) made an analogy with the seventies to debate conventional and non-conventional monetary policy instruments. The rise of the short-term interest rate could lead to an optimistic scenario. Still, the main difference from the seventies macroeconomic situation is the public debt constraint and structure that could push central banks to adopt a mix of monetary policy instruments, conventional and non-conventional, opening the discussion on the hierarchy of policy interventions.
Moving forward, Giovanni Ricco (University of Warwick) introduced the topic of climate change risk in central banks, discussing relationships between the primary mandate of price stability and the secondary one of support of the EU strategy development.
The last contribution made by Chiara Zilioli (European Central Bank), brought attention to the possible benefit of the adoption of a central bank digital currency (digital Euro) and discussed some of the legal and regulatory challenges in designing a digital form of private and public money.
The event was concluded by the keynote speech of Governor Ignazio Visco who gave the Bank of Italy's perspective on the present global economic scenario, considering the topics discussed during the panel.
“ Since the introduction of the euro, we have always shown our willingness to invest greatly in the analytical capacity of the ECB and the national central banks of the euro area, as well as the readiness to adjust our tools to account for all the factors affecting the pursuit of price stability preservation. Today, the main threat to this objective comes from the energy shock, mostly a consequence of the conflict in Ukraine, which has sparked an exceptional rise in inflation, not only within the euro area.
[…]
The redistributive and allocative consequences of what happens on the energy front, in fact, cannot be ignored. If, however, it was to be decided that the redistribution should weigh most heavily on future generations by issuing public debt, we would run the risk of loading them with unfair burdens and of further fuelling both current and expected inflation.”
Read the full speech of Ignazio Visco here [ENG version]
The event can be rewatched here [only in ITA]