Report
The key problem for central banks: The incompatibility between employment and asset price stability objectives
There is no longer any incompatibility between central banks’ employment objective and objective of stable goods and services prices, thanks to the disappearance of Phillips curve effects: even late in expansion periods, when unemployment is low and the central bank tries to further drive up the employment rate, there is no inflation. However, central banks’ employment objective and asset price stability objective are highly incompatible. This stems from the fact expansionary monetary policies drive up asset prices sharply from the start of growth periods, when unemployment is still high and the employment rate is low. For the time being, central banks’ decision - making has ignored the effect of their policies on asset prices. But is this position tenable?
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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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