Interlinkages between economic policies and financial stability

In Banka Slovenije, we hosted a discussion entitled Interlinkages between economic policies and financial stability, where delegates participated in a debate concerning the meaning of cooperation and intervention of all economic policies, i.e., monetary and fiscal, in a changing economic environment. The speakers also addressed one of the key questions – how can monetary and fiscal policy affect financial stability, and how should financial vulnerabilities be taken into consideration in the decision-making process.

The environment in which we live and work has changed radically in recent years: the Covid-19 pandemic was followed by the Russian military aggression, the consequences of which have escalated over the course of this year. This is introducing additional limitations and a good deal of uncertainty into the economic environment, which have recently been reflected most evidently in a sharp rise in inflation, an uncertain outlook for economic growth, and volatility on the financial markets.

To address these challenges, central banks reached a consensus some time ago about making changes to monetary policy. Thus on the Governing Council of the ECB we acted by, among other things, raising the key interest rates, and our expectation is that this policy will continue. In this way we are helping to prevent the current inflationary pressures from extending over the medium term.

The key to successfully dealing with soaring inflation and reducing the uncertainty that we face is for all economic policy strands, both monetary and fiscal, to act and work together. One of the key questions is how monetary policy and fiscal policy can affect financial stability, and how financial vulnerabilities should be taken into account in the decision-making process.

The latter was discussed at an event in Banka Slovenije, where high representatives of monetary and fiscal policy took part: Isabel Schnabel, member of the Executive Board of the European Central Bank, Klemen Boštjančič, finance minister, Peter Kažimir, governor of the National Bank of Slovakia, Boštjan Vasle, governor of Banka Slovenije and Nadia Calviño, Spanish minister for economic affairs and digital transformation, who attended online. The discussion was moderated by Mojmir Mrak, full professor at the School of Economics and Business in Ljubljana.

Presentation by Isabel Schnabel, Member of the Executive Board of the ECB

A recording of the discussion is available here.