Is US or Eurozone monetary policy restrictive, or is it going to become restrictive? Natixis Analysts they examine whether the two conditions are met for monetary policy to become restrictive.
Conditions for monetary policy to become restrictive
“For monetary policy to be restrictive: The real interest rate (calculated with core inflation or the GDP deflator) must be higher than potential growth; mortgage rates must be higher than the growth rate of per capita wages .”
“In the US, the long-term real interest rate is still well below potential growth, but the mortgage rate is above nominal wage growth. A significant recession in residential investment is normal, so , monetary policy is partially restrictive.”
“In the Eurozone, the long-term real interest rate is well below potential growth, and the mortgage rate is below nominal wage growth; monetary policy is therefore fully expansive.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
