ECB’s Schnabel: Subdued growth not proof of restrictive policy

• Subdued growth not proof of restrictive policy.
• Can’t say with confidence policy is restrictive.
• The nature of the inflation process is likely to have changed lastingly.
• We are transitioning from a global “savings glut” towards a global “bond glut”.
• First, a higher R* calls for careful monitoring of when monetary policy ceases to be restrictive.
• There is still ample excess liquidity.
• The natural rate of interest in the Euro Area has increased appreciably over the past two years.
• If QT leads to a scarcity of reserves, it may cause the overall convenience yield to rise and hence equilibrium rates to fall.
• It is becoming increasingly unlikely that current financing conditions are materially holding back consumption and investment.

This article was written by Giuseppe Dellamotta at www.forexlive.com.