Report
What if the limit to highly expansionary monetary policies is asset prices (especially real estate prices) and not goods and services prices?
There is often concern about the risk that inflation (in prices of goods and services) will force central banks to switch to a more restrictive monetary policy. This may be the case, especially in the United States, but monetary policy would become only moderately more restrictive: even if nominal interest rates rise, real interest rates will remain negative. And it is precisely the persistence of negative real interest rates that poses a problem: it leads to a sharp and continuous rise in asset prices, especially in real estate prices. And it is this sharp rise in asset prices, especially real estate prices, that could one day force central banks to switch to a truly more restrictive monetary policy.
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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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