The new monetary policy of the Federal Reserve risks displacing the ECB and, in perspective, of seriously harm European exports. Thursday, from the Jackson Hole symposium, the president of the US Central Bank, Jerome Powell, heralded an epochal revolution: interest rates on the dollar will no longer be raised as soon as the return of inflation appears on the horizon (golden rule in force since the 70s), but will remain low even if price growth were to reach “around 2% ”. Indeed, the Fed may even temporarily push the bar beyond this limit to compensate for periods of too low inflation. The goal is to support economic growth and the recovery of employment. The bottom line, however, is that the markets and indebted Americans can rest easy: American rates will remain low for a long time to come and the ocean of liquidity in circulation will only increase.
This means that, in the medium term, the monetary policies of the Fed and the ECB could differ for the first time in years and interest rates rise again sooner in Europe than in the United States. If that happened, the euro would greatly strengthen against the dollar, making exports from the currency area less competitive.
As he explains in an interview with Republic the Economist Lorenzo Bini Smaghi, Italian member of the board of the ECB until 2011 and today president of the banking giant Société Générale, "it is possible that, when Europe recovers, the ECB's monetary policy will become less expansive regardless of whether the critical threshold of 2 has been reached %".
Since yesterday, however, we have known that this will not be the case in the United States. Indeed, Powell clarified that "monetary policy will remain expansive when the economy recovers even if inflation exceeds 2%, and for a long time - continues Bini Smaghi - If this approach prevails, rates in Europe will rise sooner than in America, with a monetary gap between the shores of the Atlantic which could lead to a very negative increase in the price of the euro for exports”.
