Report
Central banks’ conflict of objectives: Why financial instability is inevitable
Our starting point is that central banks will have to keep in place very low long-term interest rates and negative real long-term interest rates, even if inflation remains quite high, for two reasons: To ensure public debt sustainability, given very high public debt ratios; To avoid a drastic downturn in asset prices; To enable the necessary investments in the energy transition, which have very long horizons and often low profitability. If real long-term interest rates remain negative for long, then financial instability will remain high: overindebtedness, abnormally high asset prices. But it is unclear how monetary policies could combat financial instability if they want to avoid a debt crisis or a collapse in asset prices and if they want to support the energy transition.
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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.
Patrick Artus
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