Among the main challenges at the time of writing for the future are the
following four:
First, the potential materialization of adverse contingencies could
derail the relatively mild and fragile economic recovery in the euro area.
Such contingencies include, at the present juncture, a worsening of the
external repercussions of the political crisis in Ukraine, the reemergence
or broadening of emerging market tensions, and the emergence of euro
money market volatility that is transmitted across the yield curve. These
occurrences could “test” the zero lower bound of policy rates in the euro
Second, inflation could become too low or the present period of low
inflation could become too long (or both). In the present prolonged
period of low inflation the ECB has to be vigilant that inflation
expectations remain anchored and that the tail risk of deflation does not

 This was also one motivation for the ECB to strengthen over
time its forward guidance on policy rates that it had started in July 2013
in the context of money market spillovers and volatility associated with
the debate about the U.S. Federal Reserve tapering its asset purchases.
Third, by November of 2014 the ECB will become a bank supervisory
authority. In integrating the Single Supervisory Mechanism to its

defined by conventional policy, which had not reached the zero lower bound, find its
way through the economy. 

New Issues in Monetary Policy: International Experience and Relevance for China
activities, it will have to define how the monetary policy function and the
new supervisory function relate to each other, respecting the legislative
requirements for adequately separating them to manage potential
conflicts of interest and reputational risks.
Fourth, and taking a more medium- to long-term perspective, like
many other central banks the ECB will have to answer the question of
what the “new normal” will be for monetary policy. Which of the new or
varied policy instruments will become part of the conventional toolkit,
which will remain unconventional ,and which can be removed once the
crisis is fully overcome? And, finally, what will the role of conventional or
unconventional monetary policies be relative to potential
macroprudential regulatory policies?

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