Webinar debates role of monetary policy in economic recovery after health crisis

The COVID-19 pandemic has affected economies across the world. Governments have taken measures to minimize the economic impacts of the health crisis and they are now working to help GDP, the labor market and economic activity recover. But what role will central banks play in this process? This question and possible ways forward will be debated at a webinar called “Economic Recovery and Monetary Policy” on September 8. It will be broadcast on FGV’s YouTube account, between 10 am and 11:30 am.

The speakers will be Mário Mesquita, the chief economist of Itaú Unibanco; José Júlio Senna, the head of FGV IBRE’s Center for Monetary Studies; and Affonso Celso Pastore, an economist and partner in A.C. Pastore & Associados. The moderator will be José Roberto Campos, Valor Econômico’s “Opinion” section executive editor.

At the moment, the global economy is experiencing a new macroeconomic environment, characterized by modest inflation and exceptional low interest rates. For example, in Brazil, the benchmark Selic interest rate stands at 2%, an all-time low. The coronavirus crisis has intensified reductions in these indicators across the world and forced central banks to take less orthodox monetary measures.

“Developed countries have used a wide variety of less traditional instruments. For example, Japan’s central bank has set negative interest rates, bought market assets, enacted a yield curve control policy and provided forward guidance. In the United States, the Federal Reserve has been acting in a more restricted manner, limiting itself to working with zero interest rates, asset purchases and forward guidance. This suggests that the range of options used by central banks depends on the severity of the economic situation. In Japan, the range is broader because the country has faced very modest growth and episodes of deflation since the 1990s. The United States’ economic performance has been much better,” says FGV IBRE’s José Júlio Senna.

The participants will debate topics such as the future of economies without the fiscal support measures adopted during the pandemic, the time it will take for the economy to return to its pre-crisis level, and the extent to which monetary policy will assist this recovery. According to Senna, “The main challenge facing central banks will be to maintain enough monetary stimulus to drive forward the economy, but without causing excessive financial imbalances, which could harm the economic recovery.”

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