Even if it is concerned about the sharp rise in asset prices, could the ECB raise interest rates?
The ECB is now expressing its concern about rising asset prices, especially real estate prices. First, it is clear that this rise is due to its own actions: very low long-term interest rates, very negative real long-term interest rates, large liquidity injections: as long as monetary policy is so expansionary, macroprudential policies can do little to stop asset price rises. Could the ECB then raise its interest rates to stabilise asset prices? Stabilising asset prices would require a significant rate hike, which is difficult to imagine given: The need to ensure public debt sustainability; The determination to increase the employment rate; The need to support the implementation of the investments needed for the energy transition, whose financial return is modest.