EU. Rapid ageing could keep ECB’s hand tied for next decade: ECB paper
The rapid ageing of Europe’s population may keep interest rates depressed over the next decade, potentially limiting the European Central Bank’s ability to adjust policy, a research paper published by the ECB on Wednesday showed.
The expected rise in the share of people not working will hold back growth and limit investment, making it necessary for governments to encourage later retirement, and to promote innovation and investment, the researchers said in a paper that does not necessarily represent the ECB’s opinion.
“Empirical evidence presented in this paper suggests that over the next decade, adverse demographic developments in the euro area may continue exerting downward pressure on short- and long-term nominal and real interest rates, potentially limiting the ability of monetary policy to adjust its stance due to the presence of the lower bound to policy rates,” the paper said.
With ECB rates at record lows, policymakers have relied on a plethora of unconventional tools to boost growth and prices but some have argued that rapid ageing, technological leaps and globalization naturally cap wages, prices and ultimately central bank interest rates.
Read full news here: Reuters
