Report
Patrick Artus

Minimax strategy for central banks: What effects?

It seems that central banks have switched to a "Minimax"-type strategy to choose their monetary policy. This involves using monetary policy to improve as much as possible (Mini) the worst situation that could arise (Max). The central bank’s mandate is then to limit the seriousness of crises as much as possible instead of considering all situations. We believe it is this switch to a Minimax-type strategy that explains: The fact that a very expansionary monetary policy is maintained in the euro zone, which shows that the worst situation for the ECB is the return of a deflationary crisis, and that it chooses its monetary policy mainly to reduce the probability of this occurring ; The choice to normalise monetary policy in the United States, which shows that the worst situation for the Federal Reserve is an unexpected return of inflation now . Monetary policy is chosen mainly with a view to reduc ing the risk that is perceived as crucial, i.e. the risk of inflation, not to improve the most likely situation of the US economy.
Provider
Natixis
Natixis

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Analysts
Patrick Artus

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