Low Interest Rates: Is the ECB’s Policy Correct?

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.