The ECB’s masterplan to manipulate markets
Could it misfire?
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
- How higher interest rates will squeeze government budgets
- American inflation tops forecasts yet again, adding to recession risks
- The ECB’s masterplan to manipulate markets
- Why markets really are less certain than they used to be
- The legacy of Abe Shinzo will shape Japan’s economy for years
- Inflation shows both the value and limits of monetary-policy rules
From the July 16th 2022 edition
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