With the ECB's expansionary policies having failed to push inflation rates back up to the authorities' target of “below but close to 2%,” some economists are now advocating so-called “helicopter drops” – that is, financing private consumption with the printing press. Such a move would be a huge mistake.
MUNICH – Despite years of expansionary monetary policy, the European Central Bank has failed to push inflation back up to its target of “below but close to 2%.” The latest measures – a zero interest rate on the ECB’s main refinancing operations, an increase in monthly asset purchases from €60 billion ($67 billion) to €80 billion, and an even lower deposit rate of -0.40% – are unlikely to change this. That is why some economists are urging the ECB to go even further, with so-called “helicopter drops” – that is, financing private consumption by printing money.
MUNICH – Despite years of expansionary monetary policy, the European Central Bank has failed to push inflation back up to its target of “below but close to 2%.” The latest measures – a zero interest rate on the ECB’s main refinancing operations, an increase in monthly asset purchases from €60 billion ($67 billion) to €80 billion, and an even lower deposit rate of -0.40% – are unlikely to change this. That is why some economists are urging the ECB to go even further, with so-called “helicopter drops” – that is, financing private consumption by printing money.