This shortening occurred even though the ECB’s assessment of prices and economic activity and its monetary policy inclination remained constant. The earlier-than-projected hike in the interest rate implies a faster-than-projected monetary tightening, which may undermine the economic recovery process.
Potential laxity of credit risk management by financial institutions in a climate of low rates. Supervision, appropriate risk management governance and the regulation of provisions should deal with this problem Wealth effects and increased inequality. The stronger economy and lower unemployment that result from the LSAPs mitigate but do not eliminate this possible side effect.