Monetary Policy

Monetary policy has wide ranging effects on the economy and society as a whole. The actions taken by central banks with regard to interest rate levels, inflation targets, and exchange rates are key factors in investment decisions and play a significant role in the distribution of wealth and income. They also have a critical impact on social security systems and the ability of savers to secure adequate real income over their lifetime. In addition, the influence of monetary policy on asset prices in general and housing markets in particular as well as its effects on commodity prices and volatility have considerable social and environmental repercussions.

Nonetheless, the links between monetary policy and a broad sustainability agenda that strengthens individual opportunity, social cohesion and environmental resilience are rarely reflected in policy debates. The nexus between central bank decisions and inequality are seldom on top of agendas. And the social and environmental effects of regional and sector biases in monetary policy often go unnoticed.

This is particularly striking as the current crisis has continuously increased the influence of central banks and the policies they enact. Bringing light to this blind spot is critical. As central banks transfer billions of dollars into the global economy on a monthly basis, we urgently need a solid understanding of the effects their actions have on sustainability. We need a thorough analysis of policy alternatives and their impact. And we need to build a community of experts from academia, business, policymaking, NGOs and the media to reflect these alternatives in policy debates moving forward.

CEP’s monetary policy program aims to make a contribution to pursuing these objectives – with a particular focus on job creation, poverty alleviation, moderating inequality, resource security and emission reductions.

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