Report
Patrick Artus

What is left in the ECB’s “tool box”?

Mario Draghi has often declared that the ECB still has many measures at its disposal to stimulate the euro-zone economy if that turned out to be necessary. But what are these stimulation measures that remain at the ECB’s disposal? Resuming quantitative easing will not push down long-term interest rates any more (there is a liquidity trap at the interest rate level already reached); It is difficult, by lowering short-term interest rates or by expanding liquidity, to have an impact on euro-zone real estate prices (which are already rapidly rising) or credit spreads (which are already tight); As capital outflows from the euro zone are already massive, it is difficult to weaken the euro's exchange rate anymore ; Helicopter money is simply quantitative easing without a subsequent reduction in the size of the central bank’s balance sheet; Eventually, only two possibilities then remain: the ECB buys equities, the only asset that keeps high risk premia, and the ECB calls for more expansionary fiscal policies that it would accompany by quantitative easing.
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

ResearchPool Subscriptions

Get the most out of your insights

Get in touch