SPEECH  Unconventional fiscal and monetary policy at the zero lower bound Keynote speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Third Annual Conference organised by the European Fiscal Board on “High Debt, Low Rates and Tail Events: Rules-Based Fiscal Frameworks under Stress” Frankfurt am Main, 26 February 2021  One of the greatest conundrums and policy challenges of our times is the coincidence of persistently low real long-term interest rates and low inflation.
Even before the coronavirus (COVID-19) pandemic, inflation across many advanced economies had been falling short of central banks’ aims for nearly a decade. In the euro area, hopes that inflation would sustainably recover to levels closer to 2% have been repeatedly and persistently disappointed, despite highly favourable financing conditions.