The ECB responded forcefully by employing a multitude of instruments, including the new Pandemic Emergency Purchasing Program. This has been effective in limiting the fall-out from the financial market stress and preserve the loose monetary conditions. Moreover, the targeted LTROs have been effective in safeguarding banks’ funding liquidity. Thereby, the emergency monetary policy measures have been an effective circuit-breaker to prevent bad equilibria.
As we have moved to the recovery phase, the focus of the monetary measures has shifted to supporting inflation, by maintaining accommodative monetary and financial conditions. However, broad and encompassing policy response is important to ensure that we don’t rely overly on individual measures that could be subject to unintended side effects if they are kept in place for too long.