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Fed chair testifies in U.S. Congress

Which Fed monetary policy ‘normalization?’

  • Monetarists see weak growth in the last decade as caused by insufficient money supply growth, despite QE and low interest rates
  • Overly restrictive, top-down regulation is seen as a reason for this insufficient money supply growth: banks need more freedom to respond to market needs
  • Deregulation is not enough; new rules are needed, based on restoring entrepreneurial responsibility in the banking sector

The “normalization” of monetary policy in the United States, which started with the first interest rate hike in December 2015, is in standby mode now. The unwinding of the Federal Reserve’s balance sheet after its formidable expansion since the 2008 crisis has been slowed down and interest rate hikes have been stalled. Fed Chairman Jerome Powell talks of a “patient” approach.

To many market-watchers, this could be a sign that the Fed does not even know what it is doing (as critics frequently charge). They are impatient to see a return to the clear rules that underpin long-term credibility and stability. For some monetarist economists, the focus on interest rates, rather than money supply and the negative impact of new banking regulations, unduly complicates things. Such economists see the policy normalization process as an opportunity for a paradigm shift toward better monetary and banking governance.

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Dr. Emmanuel Martin
Criticism of the current regulatory framework does not mean a plea for an absence of regulation
read more about it in the report
What's inside
  • Monetarists see weak growth in the last decade as caused by insufficient money supply growth, despite QE and low interest rates
  • Overly restrictive, top-down regulation is seen as a reason for this insufficient money supply growth: banks need more freedom to respond to market needs
  • Deregulation is not enough; new rules are needed, based on restoring entrepreneurial responsibility in the banking sector
Who will benefit?
  • Report is targeted to the decision makers in cross country manufacturing – suppliers, manufacturers, logistics.
  • Also considered useful for the administrative university facilities, to better understand the possibe effects of current decisions.
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