ECB: A problem foretold

Even though the euro zone’s unemployment rate has been declining since 2013 and significant hiring difficulties emerged in 2017, the ECB has not begun normalising its monetary policy, on the contrary. Now, euro-zone growth is slowing, which is due in particular to the global industrial cycle. The ECB is therefore trying to boost economic activity, mainly by cutting the interest rate on banks’ deposits at the central bank and by resuming quantitative easing. But given the starting point for interest rates and the fact that this marginally more expansionary monetary policy has already been priced in by the financial markets, the ECB’s reaction to the growth slowdown is not going to have any stimulatory effect on activity. This is occurring despite the recommendation from many economists that central banks give themselves significant leeway at the end of the expansion period to be able to act in the event of an economic slowdown.