The ECB’s masterplan to manipulate markets
Could it misfire?
![The European Central Bank is pictured in Frankfurt, Germany, Wednesday, March 9, 2022. The governing council of the ECB will meet on Thursday. (AP Photo/Michael Probst)](https://www.economist.com/cdn-cgi/image/width=1424,quality=80,format=auto/media-assets/image/20220716_FNP501.jpg)
Financial markets are supposed to follow a strict division of labour. The central bank sets the risk-free rate to stimulate or cool the overall economy, but it is “market-neutral”: it does not favour any asset over another. Private investors choose who to lend to and at what risk premium. Combine the two judgments, and the economy should have a set of interest rates that reflects economic conditions.
This article appeared in the Finance & economics section of the print edition under the headline “The visible hand”
Finance & economics July 16th 2022
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- The ECB’s masterplan to manipulate markets
- Why markets really are less certain than they used to be
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- Inflation shows both the value and limits of monetary-policy rules
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