Writing for Bloomberg‘s daily newsletter, Patrick Artus, Natixis’ Chief Economist, discusses the European Central Bank’s attempt to bring up inflation with quantitative easing (QE), which is markedly failing.
Through falling interest rates, rising asset prices and a depreciating euro, the central bank hopes to restore growth and inflation to the region. However, Artus points out that the ECB fails to acknowledge the financial risks posed by the monetary tool it has wielded since 2014.Certainly, faith in the power of monetary policy is wavering. The positive effects of QE on the euro area’s inflation rate is weak, if not non-existent. What expansionary monetary policy is succeeding at, however, is the creation of financial instability.
Despite this self awareness, the ECB refuses to give up on its objective of reviving inflation in the euro area – and so, Artus warns, we should expect its monetary policy to continue to become more and more expansionary, with very day posing a greater risk of financial collapse.