Julien Pinter, Researcher at Charles University in Prague (Czech Republic) and Economist at BSI Economics, answers three questions on the changing role of central bankers.
BSI Economics – Should we expect higher inflation as a result of central bank asset purchases?
Julien Pinter – I don’t think the ECB’s current asset purchase programs will « create » more inflation than they did between 2015 and 2019. The channel to inflation is still the same: asset purchases lower long-term interest rates, which encourages investors to invest more and consumers to consume more. The current measures also have another objective here: to reassure the markets and contain risk premiums. Given the enormous uncertainty at present, I think there is a greater chance that the current asset purchase programs will « create » less inflation today than they did in previous years.
Could the concept of helicopter money become widespread?
There is a lot of debate on this topic, which I find very confusing at times. If helicopter money is understood to mean « money creation by the central bank without the purchase of assets in return and directly intended for households, » I don’t think we will ever see this kind of policy. If helicopter money is understood to mean « monetary financing by the central bank (through money creation) of certain budgetary expenditure, » I don’t really see the point when governments can borrow at very low rates with limited risk premiums.
Current debates focus on the possible monetization of debt. Is this relevant?
If by monetization we simply mean « the creation of money by the central bank to buy Treasury bonds » (excluding QE), it is a policy that may temporarily appear relevant when there is a risk that investors will become concerned about government debt. The central bank signals that it is present and can be counted on. Outside of this context, monetization is not particularly desirable in my opinion (I am not referring to QE, which aims to boost inflation and can therefore remain in place for a long time if the risk of deflation persists).
