Expected increases in interest rates and reductions in real GDP growth rates will result in relatively small increases in public debt-to-GDP ratios, but inflation will reduce debt ratios very substantially
The ECB should design a specific tool that will accompany interest rate hikes to neutralise the risk of fragmentation directly for countries facing it, staying within the bounds of the EU treaties and ensuring political legitimacy. We also advocate structural changes to the ECB’s collateral framework to avoid unnecessary uncertainty surrounding the safe asset status of European sovereign bonds.
Even though inflation in the euro area is lower than in the US, three issues make it a lot more difficult for the ECB to control inflation and preserve financial stability. Once again, the limits of EMU architecture are visible and will require a rethink.
What are the implications of prolonged inflation?
How is monetary policy evolving in the face of recent crises? With central banks taking on new roles, how accountable are they to democratic institutions?
The events that have unfolded since 24 February have solved one dispute: inflation is no longer temporary.
Introducing average over time without defining what this means is counterproductive and current levels of inflation in the US will sooner or later expose this weakness in the Fed’s new strategy.
Presentation of the Yearbook of the Euro 2022.
Fed shift towards raising rates will make it hard for China and Japan not to tighten monetary policy.
Will inflation continue to surge?
Policy focus should be on tackling uncertainties by being able to tackle as many scenarios as possible.
The European Central Bank is right to propose inclusion of owner-occupied housing services in the inflation indicator. But the ECB’s preferred method would involve an asset price in the consumer inflation indicator.