Die Europäische Zentralbank ist der Preisstabilität verpflichtet. Ihr Ziel ist es, die Inflationsrate mittelfristig knapp unter zwei Prozent zu halten.
Inflation has started to increase, and the return of inflation comes at a time in which economies begin to recover from pandemic-induced and lockdown-induced recessions. This raises questions about how much and how long inflation will go up as well as about whether central banks have to step-up against inflation at the cost of slowing down the economic recovery. Has “low for long” turned into “higher for longer”?
The monetary policy of the European Central Bank is under fire from two sides. While one side regards the ECB’s monetary policy as too expansionary, the other holds it responsible for keeping the measured inflation rate below target.
The German Constitutional Court has rightly expressed doubts about the monetary policy of the European Central Bank (ECB) and has asked the European Court of Justice for a legal review of it. This time, the case is about the Public Sector Purchase Program (PSPP), within which the ECB has already purchased bonds worth 1.6 trillion euros. The limits on the asset purchases have to be clarified.
After the economic recovery has strengthened and inflation rates have increased, hopes for higher interest rates emerged among savers, while debtors began to fear higher financing costs. This article argues, that there is room for higher interest rates, but this room is small compared to historical interest rate levels.
The US Federal Reserve has not raised its key interest rates despite good economic data. The new US government is likely to be satisfied with this decision, because low interest rates help to fund its planned infrastructure projects. The political pressure on the Fed is therefore likely to increase.
Despite of the European Central Bank’s (ECB) accommodative monetary policy stance, Euro Area inflation expectations remain persistently depressed. Financial intermediaries’ interest rate margins have been squeezed and the secondary market for sovereign debt is running out of bonds. As a consequence more and more European economists call for a tool of last resort – helicopter money. A contribution by Michael Hüther for The International Economy, a specialized quarterly magazine.
Since the outbreak of the European financial and economic crisis in 2008, the monetary policy of the European Central Bank (ECB) has been in crisis mode. Ensuring that the growth in the money supply transmutes into higher inflation or inflation expectations has been difficult.
The US Federal Reserve Bank (Fed) raised its policy interest rates again after a prolonged wait-and-see period. Although the rise is only moderate, the higher US interest rates could benefit the Eurozone.
The US Federal Reserve Bank (Fed), postponed an increase in its key policy rate again. Last year, the Fed had officially ended its low interest rate policy. But despite improved labor market data it has delayed further rate hikes. The central bank is far away from a "normal" policy rate, which would be 4 percent in the United States, - therefore the Fed might have to rely on negative policy rates like in Europe in the forthcoming economic downturn.
Eurozone inflation underperforms since the beginning of 2013 and monetary policy struggles to stabilize it since then. The items of the aggregate inflation rate indicate that low inflation is due to both supply and demand factors and weak demand is caused by indebtness and unemployment. Additional monetary policy measures are not required in the current situation because monetary policy has long lags when economies are indebted and it already helped to reduce cyclical unemployment.
Senior Economist for Monetary Policy and the Economics of Financial Markets
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