From the very start, it was important to me that the PEPP is closely tied to the pandemic. [6] Once the emergency situation is over, the PEPP needs to be terminated. Even then, the monetary policy stance will still be very loose overall. The prospect of fiscal policy increasingly engulfing monetary policy still worries me today.
To stick with the Greek mythology imagery – nobody should confuse central banks with a cornucopia that continually fulfils its owner’s desires. Here it is worth taking a look at how public finances and the central bank are interwoven through the balance sheet.