So the benefits to the rest of the euro area of such a policy would be dubious, while it would be neither useful nor necessary for Germany, against the background of its benign cyclical position and ageing society. Inflation in the euro area is expected to rise in line with the robust economic growth.
Some pressure for depreciation will therefore be exerted on the exchange rate. • Second, liquidity conditions in the domestic money and capital markets will tighten, and upward pressure will be exerted on interest rates and yields on financial assets. • Third, banking institutions will lose liquidity and their capacity to provide loans to their domestic clients will be reduced.