Report
Patrick Artus

An alternative monetary policy?

Central banks are currently faced with: High inflation, which they must combat; The need for much investment, given investments in the energy transition and the need to raise corporate investment and housing investment. The monetary policy that would both support investment and curb the cyclical component of demand to curb inflation is quite clear: Raise short-term interest rates sharply; Invert the slope of the yield curve to keep long-term interest rates relatively low, which would support investment. Central banks should therefore raise short-term interest rates sharply and keep quantitative easing in place. Curiously, they are doing the opposite (no more quantitative easing and even quantitative tightening, moderate increase in short-term interest rates). This may stem from the conservatism of central banks, which are following the usual monetary policy sequence (end QE then raise interest rates), or from their opposition to an inversion of the yield curve (because it would herald a recession, or because it would be bad for banks and institutional investors ).
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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