https://www.bundesbank.de/en/press/speeches/deglobalisation-disrupted-education-and-debt-economic-policy-challenges-following-the-pandemic-84…  2/11  19/10/2020  Deglobalisation, disrupted education and debt: economic policy challenges following the pandemic | Deutsche Bundesbank  More generally, in order to maintain price stability, monetary policy aims to smooth aggregate demand over time by adjusting interest rates.
For example, if a shortfall in aggregate demand were to weigh on the inﬂation outlook, the central bank would cut its policy rate or bring long-term interest rates down by purchasing bonds. However, while this mechanism is helping to stabilise the economy, it cannot, on its own, address the economic dislocations caused by the pandemic shock we have witnessed.