Two Sides of the Same Sparkly Coin?. Disinflation and Financial Market Jitters amid Monetary Tightening

Christian Glocker, Stefan Schiman and Thomas Url
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Christian Glocker: WIFO
Thomas Url: WIFO

in WIFO Studies from WIFO

Abstract: Restrictive monetary policy dampens inflation effectively, but it also raises stress in financial markets. This happens through revaluations of financial assets on banks' balance sheets and through dampened economic activity. Moreover, apart from the positive effect of exiting negative interest rates, banks' net interest margin is generally negatively affected by interest rate hikes. With most of the disinflationary impact of higher interest rates yet to materialise, monetary policy should allow the financial sector to digest the rapid rate hikes of last year by reducing the pace of tightening.

Keywords: Disinflation in the EMS and in the Non-EMS Countries. What Have We Learned?; Monetary Policy (search for similar items in EconPapers)
Date: 2023 Written 2023-05-24
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Persistent link: https://EconPapers.repec.org/RePEc:wfo:wstudy:70838

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