benoit cœure : asset purchases as an instrument of monetary policy speech by mr benoit cœure, member of the executive board of the european central bank, at the high - level conference on “ monetary policy in the new normal ” organised by the imf, washington dc, 13 april 2014. * * * thank you very much for inviting me to open this session on whether central banks should continue to target longer - term bond yields in normal times. my first instinct when presented with this question was to provide a rhetorical answer and say that to continue targeting longterm bond yields one has first to have started doing it. and indeed, the ecb has so far only intervened in long - term bond markets, such as the covered bond market, to restore monetary policy transmission in malfunctioning market segments and help enforcing a given monetary policy stance. we have not so far resorted to a policy of targeted asset purchases that aim to alter the monetary policy stance – what is universally, if in my view inaccurately, referred to as quantitative easing. on second thoughts, however, this would be the wrong way to reply. it would not only be wrong because we have recently made clear that asset purchases are an instrument that we are ready to use if we deem necessary. it would also be the wrong answer because the question of whether central banks should target longer - term bond yields provides a good focal point to reflect on what monetary policy is trying to achieve in the first place. in other words, instruments are just the tail that wags the dog. let me try and explain what i mean as concisely as possible. focusing specifically – and at the risk of over - simplifying the issue – on the interest rate channel of monetary transmission, monetary policy operates by raising or lowering the interest rate in the economy. a lower ( real ) interest rate lowers the cost of capital for firms, encourages investment spending and stimulates consumption. a higher real interest rate has the opposite effect. but the point of course is that there is no such thing as one interest rate to which all economic agents respond. there are at least three ways in which interest rates are differentiated in the euro area. there is vertical differentiation – different economic agents are sensitive to interest rates with different maturities. there is spatial differentiation – different interest rate curves provide the reference rates in different jurisdictions. and there is horizontal differentiation – within jurisdictions, different markets determine firms ’ and households ’ cost of borrowing. what this implies is

##ing climate were significant but manageable, while delayed action was dangerous and much more costly. importantly, the report concluded that there was still time to avoid the worst impacts of climate change, if we took strong action. source : world meteorological organization, 3 december 2019, january to october. https : / / public. wmo. int / en / media / press - release / 2019 - concludes - decade - of - exceptional - global - heat - and - high - impactweather intergovernmental panel on climate change ( 2018 ). european parliament, press release 29 - 11 - 2019. https : / / www. europarl. europa. eu / news / en / pressroom / 20191121ipr67110 / the - european - parliament - declares - climate - emergency http : / / www. lse. ac. uk / granthaminstitute / publication / the - economics - of - climate - change - the - stern - review / https : / / webarchive. nationalarchives. gov. uk / 20100407163608 / http : / / www. hmtreasury. gov. uk / d / summary _ of _ conclusions. pdf 2 / 5 of course, it is worth repeating that these conclusions were flagged already in 2006, more than thirteen years ago. unfortunately, it would seem that it hasn´t been till recently that this call for action has been taken seriously. in his keynote presentation lord stern will shed some light on whether we are still in time to avoid the worst impact. thank you very much for accompanying us today. still, we shouldn´t forget that the fight against climate change also has a human and social dimension. the transition to a low - carbon economy must also be “ fair ” or “ just ” for the economic sectors most affected. this is one of the objectives of the 2030 agenda for sustainable development, which commits to eradicate poverty and achieve sustainable development worldwide by 2030, ensuring that no one is left behind. the agenda integrates in a balanced manner the three dimensions ( economic, social and environmental ) of sustainable development through seventeen sustainable development goals. ms. cristina gallach, high commissioner for the 2030 agenda, will moderate the panel that will follow lord stern´s presentation, and will share with us the progress that is being made in this respect. thank you very much, cristina, for being here today. i am sure we are all looking