Report
Is there a risk of deflation in the euro zone that would justify negative interest rates?
Negative interest rates are normally justified in a country if there is a risk of deflation in this country, i.e.: A shortfall in demand for goods and services; Leading to a sharp decline in inflation (to negative inflation) which leads to abnormally high real interest rates that reinforce the weakness of demand; Declining asset prices linked to abnormally high real interest rates. There is definitely a shortfall in demand in the euro zone, but it is not leading to declining inflation or to falling asset prices. Even if nominal interest rates were "normal", real interest rates would not be abnormally high.
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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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