New strategy: The ECB is loosening up – and green


The new strategy of the European Central Bank has it all: The central bankers allow more inflation and more climate protection. That helps the crisis management. But the political neutrality is gone.

Nobody has mastered the monetary policy obscuration rhetoric better than Alan Greenspan. “If my statements were too clear to you, then you must have misunderstood me,” the long-time president of the US Federal Reserve used to mutter. Central bankers are traditionally like that. You shy away from communicative clarity. This also applies to the European Central Bank, which started as the guardian of a stable euro 23 years ago in Frankfurt am Main. Too clear statements? Nothing. Until now, anyone who really wanted to understand what monetary politicians were saying had to be able to read between the lines. So far. That is changing now.

The incumbent ECB President Christin Lagarde has had a new strategy drawn up. The central bank’s new line creates more clarity – and at the same time promotes climate protection. So far, Lagarde and her colleagues in the Governing Council had an inflation target of “below but close to two percent” in the medium term. In the future, the target value will be exactly two percent on average. That sounds like just a homeopathic increase. But the new target is still tough. In future, the central bank can leave interest rates unchanged even if the inflation rate occasionally overshoots the two percent mark.

The euro guardians, whose declared goal is price stability, are thus gaining more leeway in fighting inflation. You can accept higher inflation rates – at least for a while. Because the two percent mark is only an average. If the price development in the euro zone is lower before that, you do not have to lapse into operational hectic and turn the interest rate screw at values ​​of more than two percent.

The result: The interest rate level can therefore remain low for the time being, even with rising inflation values. Coupled with the constant number of new bond purchases, this slows down an increase in corporate bankruptcies, avoids credit crunch for troubled euro countries and reduces the risk of another financial crisis in the euro area. Shareholders and property owners also benefit from the low interest rates – first of all, because it is fueling the boom on the stock exchanges and the housing market. Sure, there is a risk of overheating. The central bankers must also look to this.

Losers are people with low incomes. You can barely afford to buy stocks and real estate. After all, many jobs seem secure if the economy continues to run smoothly. Nonetheless, current monetary policy favors the wealth of the rich. Seldom before has monetary policy pushed the distribution of wealth so strongly.

Actually, the ECB should act politically independently and be neutral. That’s how it was designed. The fact that the central bank wants to take climate change into account in its work in the future is understandable from a sustainability perspective. In efforts to achieve political independence, however, it threatens to make itself vulnerable. If it excludes certain sectors when buying corporate bonds, it could make waves on the capital market. Bonds from companies, which cannot be exchanged for liquidity at the central bank in an emergency, lose value. The risk of a crash increases.

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