December 8, 2022

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Monetary policy, the gap between the EU and the United States

Last week the important dMonetary policy decisions. In the United States, the central bank has taken the path of deregulation, which opened in November, in the face of rising inflation and low unemployment rates. This accelerated the pace of a one-time buyout of bonds that are expected to go to zero within a few months and suggested that there could be three increases in US interest rates next year. Policy. In the Eurozone (Ea), the ECB announced that the emergency plan (Pepp) for the purchase of bonds would be reduced and would not be renewed by the end of March 2022, suggesting that the same rule be applied to refinancing. Banking Sector Plan (T-Ltro3). These choices were reduced by three factors: the securities purchase program (app) was strengthened to six months; The reinvestment of income and yield on pepp-related maturities was extended for one year; It was recalled that part of the outstanding refunds due to T-Ltro3 will only expire at the end of 2024.

The reaction is general: the gap between the monetary policies of the central bank and the ECB allows very weak European governments to “sleep quietly”. However a careful study of the data tells a different story: the economic policies of the two regions differ, i.e. the combination of monetary and financial choices (Policy composition) Promises to support growth in the United States rather than the EA.

Biden management spends huge public spending on supporting low-income and improving infrastructure. If these processes are not undermined by the election results of Medieval, Lead to an increase in supply and total demand. This necessitates monetary policy controls to prevent the economy and higher inflation rates from overheating. The central bank has measured its interventions without surprising market players and achieving the target.

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Expansion plans were also launched in the EA in gratitude for the new centralized spending policy (NGEU). However, the Policy composition Europeans differ from the United States for at least three reasons.

1 By focusing on ‘green’ and digital transformation, Ngeu imposes a radical overhaul on production engines. If successful, these changes will strengthen growth potential over the medium to long term; However, in order not to have negative short-term impacts, they must be accompanied by more comprehensive monetary policies. 2 Pep has allowed even the most comprehensive national monetary policy in countries with high public debt (such as Italy); Therefore, if national cost adjustment is to be avoided with the culmination of production restructuring, it is necessary to offset Pepin’s end by adequately and consistently strengthening the processor.