Although recent news on the effectiveness of vaccines provides light at the end of the tunnel, significant uncertainty about future income prospects can be expected to prevail for some time, also because the pace of the rollout of vaccines and their acceptance among the public remain uncertain.
Heightened uncertainty, in turn, is likely to weaken the willingness and ability of firms and households to take full advantage of historically loose financial conditions. [7] In these situations, monetary policy cannot unfold its full potential. Fiscal expansion is then indispensable in order to sustain demand and mitigate the long-term costs of the crisis.