Report
Patrick Artus

Which is less dangerous for central banks: Normalising interest rates by conducting a procyclical policy or deciding not to normalise interest rates?

The Federal Reserve and the ECB have chosen to wait a long time before starting to normalise their interest rates. As a consequence, normalisation (euro zone) or the end of normalisation (United States) will probably take place at a time when the economy is slowing, i.e. leading to a procyclical monetary policy. Which then is best for central banks? Normalising interest rates even if this leads to a procyclical monetary policy? Deciding not to normalise rates? If economies are slowing, the choice to continue normalisation would lead to interest rate hikes followed immediately by cuts due to the economic situation. It is therefore not clear what is the benefit of normalising rates if interest rates have to be immediately cut again: this would create interest rate movements that would be useless and harmful to growth.
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

Other Reports from Natixis
Alicia Garcia Herrero ... (+2)
  • Alicia Garcia Herrero
  • Gary NG
Alicia Garcia Herrero ... (+2)
  • Alicia Garcia Herrero
  • Gary NG
Alicia Garcia Herrero ... (+3)
  • Alicia Garcia Herrero
  • Haoxin MU
  • Jianwei Xu

ResearchPool Subscriptions

Get the most out of your insights

Get in touch