The Bank of Spain published a video and slides from Governor José Luis Escrivá’s remarks at the Peterson Institute for International Economics event “Central banking for open economies in a changed world”, setting out how central banks can strengthen monetary policy decision-making and communication in an environment of heightened uncertainty. Escrivá framed the discussion around four areas of challenge, including financial stability risks from the growth and interlinkages of the non-bank financial intermediation sector, the role of central banks in payment systems within a tokenised financial ecosystem, and the need to modernise and simplify supervision, before focusing on “robust monetary policy under high uncertainty”. He argued that under Knightian uncertainty and fat-tailed risks, modal projections can be misleading and scenarios become a key tool, citing a 42% two-week rise in real oil prices following the 2026 Iran war as a 99th percentile historical event. The presentation illustrated scenario design using oil price paths, including a central market-based scenario, an adverse scenario and a severe tail scenario that adds persistence and additional shocks, and stressed incorporating asymmetries and non-linearities at the tails. It also distinguished between internal use of scenarios to analyse alternative monetary and fiscal policy reactions and external communication that avoids assuming monetary policy changes beyond technical assumptions, alongside monitoring real-time indicators such as long-term inflation expectations.
Bank of Spain 2026-04-15
Bank of Spain governor outlines scenario-based monetary policy approach for open economies under high uncertainty
The Bank of Spain released a video and slides of Governor José Luis Escrivá’s remarks at the Peterson Institute on strengthening monetary policy decision-making and communication under heightened uncertainty. Escrivá highlighted challenges from non-bank financial intermediation and tokenised payment systems, the need to modernise supervision, and argued that under Knightian uncertainty and fat-tailed risks, scenario analysis with explicit tail events and asymmetries is preferable to modal projections, with distinct approaches for internal analysis and external communication.