In any case, there are two things we should bear in mind: first, monetary policy can buy time but it cannot buy a solution for the underlying structural problems. Second, a prolonged period of low interest rates and high liquidity provision might sow the seed for new exaggerations and mispricing in some markets.
For example, signs of a search for yield are becoming increasingly visible. In corporate debt markets, for instance, valuations already look rather stretched. And in the global low-interest rate environment, ambitious valuations may well spread to other market segments. In this regard, the strong recovery in some countries’ property markets should set us thinking. The German housing market is no exception.