Monetary policy and inequalities

Christine Lagarde recently mentioned that the ECB’s monetary policy should also take into account inequalities and try to correct them. We will therefore look at the links between expansionary monetary policy and inequalities. We believe it is quite clear that: Very low interest rates reduce income inequality by being negative for lending households and positive for borrowing households (even if the fall in interest paid by companies is positive for companies’ shareholders); Very low interest rates increase wealth inequality by enriching households that already own financial, real estate or corporate assets . This complicates the thinking about monetary policies if they have opposing effects on income and wealth inequalities.