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Central banks need to change gear, Europe faces its biggest question

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Central banks need to change gear, Europe faces its biggest question

Thursday 18 February 2021 – Vol.12 Ed.7.4

Commentary: Central banks need to change gear

By Jacques de Larosière and David Marsh

It’s time for central banks to prepare financial markets to regain more influence over longer-term interest rates, braking the move toward fiscal dominance and alleviating the threat of another economic collapse. Major central banks should envisage shifting gear – sensitively and coordinated with overall economic developments – away from trying to hold down long-term bond yields and towards monetary normalisation for when the Covid-19 crisis is over.

Read the full commentary on the website.

Commentary: Europe faces its biggest question

By Agnès Belaisch in London

This is a pivotal year for Europe. Vaccines will free us from restrictive lockdowns and solve the health crisis. The pandemic’s economic impact, however, will remain and we will soon find out how governments will pay for it. With the need to stimulate inflation, rather than slow it, monetary policy has to remain accommodative. However, even though debt is cheap, it is impossible to imagine that Europe will let go of its emphasis on fiscal discipline. The pros and cons of every option will have to be weighed.

Read the full commentary on the website.

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