We sometimes read that Central Banks, including the ECB, are presently squeezed by two dilemmas: the first one on their objectives, as Central Banks would have either to accept excessive inflation, or to threaten the recovery. And the second on their instruments as 4/5  BIS central bankers' speeches  they would take the risk of cliff edge effects by exiting their Covid-crisis instruments. These two views are largely wrong according to me, and I tried to explain why in the case of the ECB. Based on the successful conclusion of our strategy review and forward guidance, we can be patient in navigating through a significant but temporary surge of inflation; besides, we have beyond PEPP a broad spectrum of possibilities to further run an accommodative monetary policy, thanks to our quartet of non conventional, or “new conventional” instruments. Thank you for your attention. i Lane (P.R. ), “The monetary policy toolbox and the effective lower bound”, speech, 11 October 2021 ii Schnabel (I. ), “Prospects for inflation : sneezes and breezes”, speech, 7 October 2021 iii See paragraph 8 of ECB’s monetary policy strategy statement  5/5  BIS central bankers' speeches
In case that sounds odd given that Bank Rate has been at 0.5% for over two years, I should underline that, even in normal circumstances, monetary policy works through the expected path of our policy rate. The markets now expect us to keep Bank Rate low for longer. Two-year risk free money market rates are over 100bp lower than in the late spring. That has helped to offset the rise in credit spreads, and so means lower borrowing costs in the real world. I place weight on that, as my MPC colleagues know. Above that, we have decided to add £ to our programme of Quantitative Easing (QE). The degree of monetary stimulus will slowly increase as the agreed QE is executed. That money does not, as is sometimes suggested, get stuck with the banks. The whole point of the Bank’s operating framework for QE has been to avoid that. All central bank money is ultimately held by banks: that is what a banking system is. But by buying bonds from insurance companies, pension funds and others, we put the money into their hands. It is money that, by construction, provides a meagre return – negative in real terms – and so money that they will want to get rid of by purchasing other higher-yielding assets. Policy still works through asset prices, increasing wealth and reducing the cost of capital relative to where they would be otherwise.