Report
The policy mix is becoming broadly expansionary in the United States, while remaining broadly restrictive in the euro zone
The rapid decline in inflation will enable the Federal Reserve to cut its interest rates from 2024 and, moreover, as fiscal policy remains highly expansionary in the United States, the overall US policy mix will rapidly become highly expansionary. In the euro zone, on the other hand, fiscal policy is becoming more restrictive, and enduring inflation will lead to a persistently restrictive monetary policy. The overall policy mix will therefore become increasingly restrictive in 2024. Who is right? If the expansionary policy mix in the United States makes it possible to make major investments in the energy transition and electronics, this policy mix is completely reasonable, and the fiscal deficits will be offset by the additional resulting activity. If the euro zone’s restrictive policy mix prevents these same investments from being made, it is clearly ineffective.
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Natixis
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