The IW Monetary Outlook analyzes and classifies the anticipated monetary policy of the central banks.
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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.
Senior Economist for Monetary Policy and the Economics of Financial Markets
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