The IMF estimatesvii that without monetary stimulus in advanced economies, world growth would have been 0.5 percentage point lower in 2019 and 2020 respectively. In the euro area, there have been several convergent estimates as to the impact of monetary policy: viii between 2 and 2.5 percentage points for growth and a cumulative impact of around 1.5 percentage point over four years for inflation. Page 8 of 14  The effects are similar for France. More growth thanks to low rates also means less unemployment: the euro area has created more than 11 million jobs between 2013 and 2019, of which 2-3 million are estimated to stem directly from the effects of monetary policy, based on the latter’s contribution to growth. Source: Eurostat  The effect of low rates can also be analysed according to financial profile of economic agents. Households that need to borrow are winners thanks to the historically low level of borrowing rates, especially in France. Their real estate assets have risen in value, as have share prices. Households, including the least well-off, are benefiting from the pick-up in employment. In contrast, the returns on savings invested in fixed income products have naturally become less dynamic. There are even sometimes fears that we will see negative rates on deposits, a so-called “tax on savings”. In France, that remains and must remain an intellectual hypothesis.
The impact of interest rate changes is transmitted with a lag, but monetary policy gradually delivers results, now as ever. Reducing imbalances and restoring stability is in everyone’s interest. Some strain is inevitable during an adjustment from heavy imbalances, so complaints come as no surprise. But this does not mean that the wrong monetary policy measures are being applied – it could even mean quite the opposite. The Central Bank’s policy rate is high. The press release announcing the Board of Governors’ decision on February 8, which I quoted earlier, stated that the current interest rate may suffice to bring inflation to target within an acceptable period of time. It is impossible to state this categorically now, because it depends on the inflation outlook. What is certain is that the policy rate will be lowered as soon as the Central Bank deems this compatible with the inflation target. It is wrong to claim that this is ruled out because the interest rate differential with abroad must be maintained to prevent turbulence when glacier bonds mature. However, an untimely reduction in the policy rate will benefit no one. It has been claimed that the Central Bank is undermining the króna with its interest policy, which will cause businesses and households to abandon the currency. In this context it must be remembered that without a tight monetary stance and high interest rates, the króna would probably have depreciated by more than it actually did, demand would have grown faster and inflation moved much higher.