Your browser does not support JavaScript!

Monetary policy impacts

Monetary policy impacts

Context

Over the past 25 years, central banks – and particularly the ECB – have made aggressive use of unconventional and highly accommodative monetary tools (namely low – if not negative – interest rates and Quantitative Easing) to cushion the blows of economic shocks. These policies, whilst essential in times of crises, continued well into the mid 2010’s. This has resulted in the massive injection of liquidity into the financial system, with the total amount of money created by central banks rising from $2.5 trillion in 2000 to $25 trillion in March 2022 – a tenfold increase. To illustrate this point, the ECB’s balance sheet reached an all time high if €7.95 trillion by the end of 2022. The Eurosystem’s total assets amounted to €6.14 trillion in 2025, which remains higher than pre-2015 levels. This data shows how the ECB’s QT efforts have remained limited and prudent.

Massive monetary creation has a encouraged excessive public and private borrowing as well as disincentivised countries with already lax budgetary discipline from implementing the necessary structural reforms essential to growth. These lasting accommodating policies have not only led directly to a drop in productive investment, but also under-remunerated savings. Consequently, household capital has been kept in either liquid or speculative assets – both removed from any underlying productivity growth. The increase of wealth inequality in developed countries is also a direct consequence of the ECB’s persistent expansionist monetary policy.

With the onset of the energy crisis caused by the war in Iran, central banks currently have to contend with a new inflationary wave.

Eurofi’s Monetary Scoreboard and Policy notes presented below offer additional insight into the mechanisms and effects of central banks’ monetary policies.

Eurofi documents

Extracted from the main Eurofi publications (Regulatory Updates, Views Magazines and Conference Summaries)

Regulatory Update

Eurofi policy notes

Filter

Summary

Session Summaries

Filter

Views The Eurofi Magazine

Eurofi Views Magazine chapters

Filter

Key contributions

Speeches & interviews

Filter