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In a context of unusually high inflation, the Federal Reserve and the European Central Bank have stepped up and are in the midst of the monetary policy normalisation process, albeit at different rates.

NGEU is a powerful anti-cyclical policy, but there are many doubts about its potential scope and long-term legacy. If high-quality programmes are chosen, effectively developed and accompanied by useful reforms (the conditions attached to the disbursements could play an important role), a very high impact and potentially even permanent benefits could be achieved. If not, the boost to growth will be only fleeting.

The high level of public debt will be one of the macroeconomic imbalances that we will inherit from the COVID-19 crisis. Solving it will require sustained economic growth and the redesign of certain fiscal policies. 

The pandemic has led to cash being replaced by card payments, as shown by an analysis using anonymised internal CaixaBank data. This substitution effect is seen both at the aggregate level and at the sector level, particularly in purchases of food and durable goods.

To date, the investments already approved as part of the Portuguese Recovery and Resilience Plan (RRP) amount to 12,249 million euros, compared to total planned investments of 16,644 million euros. This represents an approval rate of 74%, which in principle looks promising in terms of getting the most out of the NGEU funds that Portugal will receive up until 2026.

In its battle against inflation, monetary policy has tightened considerably, as is clearly visible in official interest rates and those faced by businesses, households and governments. But these interest rates are not an end in themselves; rather, the ultimate goal is to cool economic activity and thus curb inflation. In this article, we have analysed the state of monetary policy transmission through one of its main channels: credit conditions.