A macro-prudential anthology (and a little more)

Last March I published a post [1] the conclusion of which was: "... the bottom line of this post is that we may, before too long, see the ECB and national macro-prudential agents in Germany and in other countries where there are more pressing financial stability concerns actively engaging in trying in earnest the macro prudential route." This prediction did not come true as yet, still I think we are moving closer to it. Indeed, macro-prudential measures are invoked more and more often to deal with the dilemma created by the need to keep interest rates close to the un-natural, zero bound (and even negative, in the case of the ECB) to fight too low inflation, while fearing its negative effects on financial stability.

The ECB is not like the mythical "one handed economist".

The assessments going around about the package of measures decided by the ECB at its last meeting at the beginning of June are definitely mixed. Some observers are more optimistic than others about its effect, in particular about its ability to remedy the gradual erosion of inflationary expectations and thus reconfirm the achievement by the ECB of its own price stability objective.