Low Interest Rates: Is the ECB’s Policy Correct?
Over the past year, the European Central Bank has implemented a low interest rate policy in order to revive the economy and stabilise inflation in the euro area. However, these measures do not come without risk: Critics fear the formation of financial bubbles or complain about one-sided capital gains for wealthy households.
Since 2013, inflation in the euro area has been too low.
In order to revive the economy and bring inflation back to target, the European Central Bank has implemented a low interest-rate policy
which includes a bond-buying programme known as quantitative easing or QE. The ECB’s measures, including historically ultra-low interest rates, also bear risks
. For example, some observers fear the formation of a bubble in real estate and stock markets or complain about one-sided capital gains for wealthy households.
This briefing, written by Philipp Ständer
, research fellow at the Jacques Delors Institute – Berlin, examines how imminent such risks are
, what the worst case scenario could be and presents options for governments to get inflation back to target.
In the publication series “Europa briefing”, the Bertelsmann Stiftung and the Jacques Delors Institut – Berlin cover key topics of European politics and present possible scenarios: What is the problem? What might happen next? And what can politics do now? You will find all the publications from the joint project here:? www.strengthentheeuro.eu