>> GROUP: Shadow ECB Council / EZB-Schattenrat  Dr. Sylvain Broyer

Dr. Sylvain Broyer: It would make sense for the ECB to increase both size and duration of its asset purchases under the emergency program. First, to act in parallel with the fiscal policy effort that keeps on swelling. The budget measures taken to date aimed at keeping working capital as well as human capital afloat. Now, the challenge is to replace the capital stock that might depreciate quicker than thought in the post-Covid world. A lot of investment in digital and sustainable assets will be necessary. Monetary policy can be supportive over this investment cycle by ensuring smooth financial conditions. Second, to contain the risk of deflation or low inflation resulting from the fall in demand, which is likely to be persistent, as the new staff projections will show.
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