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.
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.
Senior Economist for Monetary Policy and the Economics of Financial Markets
Tel+49 221 4981-732
Maildemary@iwkoeln.de
@DemaryMarkus
