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ECB before the test: dispute over bond purchases


Frankfurter Ostend: Important fundamental decisions are pending in the ECB. The litmus test, some say, for ECB President Christine Lagarde.
Image: dpa

Even if many central bank experts now regard bond purchases as a legitimate monetary policy instrument for times of crisis, one should not underestimate the risks of long-term use.

Ztwo important decisions are pending at the European Central Bank. And everything that the various actors in the central bank are currently expressing publicly must probably be interpreted against this background.

On the one hand, a decision is to be made in December to what extent the PEPP crisis program will become a longer-term institution or whether elements of it will even be permanently integrated into the box of monetary policy instruments. On the other hand, the debate on the “Strategic Review”, the strategic realignment of the ECB, is running in parallel.

No wonder that in the face of such fundamental decisions, old trenches are being opened again, especially the dispute over the bond purchases. The public debate about “fiscal dominance”, the dominance of fiscal policy over monetary policy as a possible danger, also belongs in this environment.

Because of the exceptional situation of the pandemic, the bond purchases had become quieter. But even if many central bank experts now regard something like this as a legitimate monetary policy instrument for times of crisis, one should not underestimate the risks and side effects of long-term use.

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