Report
Patrick Artus

What could cause the ECB to abandon its expansionary monetary policy?

If the ECB applies inflation targeting or, even more so, average inflation targeting (if inflation has been lower than the inflation target, it must then be higher than the inflation target), it is likely that it will never abandon its current very expansionary monetary policy. To be able to abandon this policy, the ECB would have to: Take into account that such a policy generates an unsustainable taxation of savers (future pensioners) in the medium term; React to the risk of a real estate bubble that its current policy will give rise to if it is continued; React to the moral hazard that it gives rise to in terms of fiscal policies. As long as the ECB pursues its current very expansionary monetary policy, the public debt issued by governments in reality does not exist. Fiscal solvency constraints will only reappear once the ECB abandons this policy, hence the importance of analysing the reasons that may cause this.
Provider
Natixis
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.

 

Analysts
Patrick Artus

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