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Monetary policy in uncertain times: Towards robustness and resilience

Monetary policy strategy reviews conducted in the early 2020s by several central banks were informed by a persistent undershooting of inflation targets. A key aim was thus to ensure the effectiveness of monetary policy at the effective lower bound on interest rates, and to bring inflation and inflation expectations back up to target. Given the dramatic overshooting of inflation above target starting from 2021, the question arises whether the analyses made at the time were overly focused on a particular state of the world and failed to be robust to the possibility of dramatically and fast-changing circumstances. The current environment is characterized by higher volatility and higher uncertainty and has shown how large and sudden shocks in a matter of months can sharply change economic and financial conditions, not only locally but also globally. […]