ECB's Schnabel
- Warns against relying on stable macroeconomic relationships
- Inflation risks have shifted from downside to upside since pandemic
- Natural interest rate (r*) uncertainty has increased significantly
- Phillips curve relationship becoming more state-dependent
- Our recent experience has also taught us that central bankers should be careful not to tie their hands too much by providing explicit forward guidance.
It looks like central banks are learning that QE is for markets, not the economy:
Asset purchases have proven to be a powerful tool for market stabilisation, while their cost-benefit ratio is less favourable when it comes to stimulating the economy near the effective lower bound. QE should therefore be used more cautiously in the future.
