Report
Central banks in OECD countries have moved even further from leaning against the wind
Leaning against the wind, which most economists say they favour , consist s in making monetary policy gradually more restrictive in expansion periods to prevent overindebtedness and asset price bubbles. Already in the 1990s and 2000s, central banks spurned the use of leaning against the wind in favour of what is known as “cleaningâ€: the use of a highly expansionary monetary policy when a financial crisis breaks out to contain its effects. We recap the practical and theoretical motives behind this choice . Today, central banks are rejecting leaning against the wind even more than before the 2008-2009 crisis. This is cause for concern: there is a very high likelihood of a financial crisis in the future; when this crisis occurs , there will not be able to be any cleaning, because interest rates will still be very low or may even have to be hiked if this crisis is triggered by resurgent inflation.
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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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