financial feedback loops materialise in a more adverse manner than was actually the case since the start of the crisis. simulations are based on a set of models, including the new multi - country model ( dieppe, gonzalez pandiella, hall and willman ( 2013 ) ), the new area wide model ii ( coenen, karadi, schmidt and warne ( 2018 ) ), darracq https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201126 ~ c5c1036327. en. html 18 / 19 01 / 12 / 2020 monetary policy in a pandemic : ensuring favourable financing conditions paries and kuhl ( 2016 ), and darracq paries, kok and rodriguez palenzuela ( 2011 ). the simulations consider an extreme amplification scenario in which the balance sheets of firms and households deteriorate over the projection horizon, causing banks to incur credit losses and a depletion of capital. in this quantitative analysis, the tltros are found to significantly mitigate the macroeconomic impact of adverse amplification mechanisms. for more on the models, see dieppe, a., gonzalez pandiella, a., hall, s. and willman, a. ( 2013 ), “ limited information minimal state variable learning in a medium - scale multicountry model ”, economic modelling, vol 33, pp. 808 - 825 ; coenen, g., karadi, p., schmidt, s. and warne, a. ( 2018 ), “ the new area - wide model ii : an extended version of the ecb ’ s micro - founded model for forecasting and policy analysis with a financial sector ”, working paper series, no 2200, european central bank ; darracq paries, m. and kuhl, m. ( 2016 ), “ the optimal conduct of central bank asset purchases ”, working paper series, no 1973, european central bank ; and darracq paries, m., kok, c. and rodriguez palenzuela, d. ( 2011 ), “ macroeconomic propagation under different regulatory regimes : evidence from an estimated dsge model for the euro area ”, international journal of central banking, vol 7 ( 4 ), pp. 49 - 113. see also lagarde, c. ( 2020 ), “ monetary

target for a prolonged period. in this context, it is essential that inflation expectations are anchored by the commitment of the central bank to offset the negative pandemic shock to the inflation path and ensure convergence to the inflation aim over the medium term. under these conditions, the first challenge in delivering the medium - term inflation aim is to reconnect inflation to its pre - pandemic projected path. this means boosting inflation momentum towards the upper part of the “ bcde ” area ( the grey shaded area ), so that the adjustment approaches the “ bcd ” path. by setting the monetary stance at the appropriate level to deliver the financial conditions required to offset the pandemic shock to inflation, the underlying inflation trajectory will be restored. in turn, this also serves to underpin the formation of inflation expectations in a manner that is consistent with meeting the medium - term inflation aim. looking beyond the immediate task, even once the disinflationary pressures caused by the pandemic have been sufficiently offset, the second challenge will be to ensure that the postpandemic monetary policy stance will deliver the timely and robust convergence of inflation to our medium - term aim. in this context, our in - progress strategy review will help to shape the future course of our monetary policy. conclusion the pandemic constitutes a multi - phase challenge for monetary policy. in the initial weeks of the pandemic in spring 2020, the top priority was clearly to stabilise markets. with the ongoing https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201126 ~ c5c1036327. en. html 17 / 19 01 / 12 / 2020 monetary policy in a pandemic : ensuring favourable financing conditions interruptions to economic activity throughout 2020 and running into 2021, monetary policy continues to have a clear role to play in ensuring the preservation of favourable financial conditions. this will remain an essential priority even in the post - pandemic phase, given that the macroeconomic hit from the pandemic is likely to persist even after medical solutions have been rolled out. only by ensuring appropriately - favourable financial conditions will the full economic recovery be assured and, by countering the negative impact of the pandemic on the projected inflation path, will robust convergence to our medium - term inflation aim be copperfastened. [ 1 ] i am grateful to krzysztof bankowski, giacomo carboni