Negli ultimi dieci giorni, tutti gli operatori di mercato e tutti gli investitori finali sono stati chiamati ad un compito molto faticoso: decifrare i segnali in arrivo da BCE e Federal Reserve in occasione delle due riunioni di luglio.
Si è trattao, a nostro parere, delle due riunioni più importanti del 2022: sono state infatti prese decisioni di grande rilevanza, per i mercati finanziari, per i vostri investimenti, e per i nostri portafogli modello.
E (badate bene) non stiamo riferendoci agli aumenti dei tassi di interesse, e neppure al TPI della BCE. Non sono quelle, le cose di maggiore rilievo emerse dalle due riunioni.
Lo spiegheremo in questo Longform’d: ma prima di tutto, ricapitoliamo ciò che è successo, mettendo in evidenza gli aspetti di maggiore importanza, utilizzando questo brano che per voi abbiamo selezionato.
The European Central Bank has finally pulled the trigger, raising interest rates for the first time in 11 long years and by a larger-than-expected 50 basis points to zero. The era of negative rates is over and the governing council is likely to fully take the euro zone into positive rates at its next quarterly economic review on Sept. 8. Furthermore, it unveiled an unlimited safety net for peripheral European countries' bond yields. But it wasn't enough to convince the market to reduce the spreads on Italian debt, which have soared in recent days.
It is evident that the half-point rate increase persuaded hawks on the governing council to agree to the new Transmission Protection Instrument, which will allow the central bank to buy unlimited amounts of the bonds of countries when it sees a need to to “counter unwarranted disorderly market dynamics.” The ECB statement makes that link quite clearly, as did ECB President Christine Lagarde in the press conference. But details remain sketchy, and Lagarde counterbalanced her tough talk with the perhaps-too-honest view that the ECB doesn't want ever to use the new program. Many feel that hawks on the governing council will prevent it ever being brought into action.
The central bank laid out four criteria nations must meet to qualify for assistance under the program:
Compliance with the EU fiscal framework: not being subject to an excessive deficit procedure.
Absence of severe macroeconomic imbalances: not being subject to an excessive imbalance procedure.
Fiscal sustainability: in ascertaining that the trajectory of public debt is sustainable, the Governing Council will take into account, where available, the debt sustainability analyses by the European Commission, the European Stability Mechanism, the International Monetary Fund and other institutions, together with the ECB’s internal analysis.
Sound and sustainable macroeconomic policies.
The TPI — which could be nicknamed ‘To Protect Italy’ — will be unlimited in size and depend in scale on severity of risks. But the euro markets remain unconvinced, seeing this as a shaky compromise. Defining such issues as the sustainability of a country's debt is a highly contentious issue, something German Bundesbank chief Joachim Nagel highlighted rather pointedly earlier this month.
The collapse of Italian Prime Minister Mario Draghi's coalition government this week, with national elections now expected in early October, has concentrated the focus even more on the sustainability of more indebted European countries' borrowing and economic predicament. The 10-year yield spread of Italy over Germany widened by more than 20 basis points on Thursday to over 230 basis points, close to the four-year high reached in June. With Italian 2-year yields reaching 2%, and 3-year yields at 2.5%, the nation is a far cry from the sub-zero funding levels it enjoyed as recently as earlier this year.
With euro zone inflation running at 8.6%, and into double digits in several countries, there really was no time to wait for the ECB. Despite the Italian political turmoil, swift action on curbing inflation is required as there are no signs of a respite in upward price pressure across Europe. “We expect inflation to remain undesirably high for some time,” Lagarde said,
A notable casualty of the about-change in ECB policy is the governing council's forward guidance, which has been dropped for a more expedient meeting-by-meeting approach. Lagarde twice mentioned the level of euro, which briefly fell below parity with the dollar this month, as creating inflationary pressures. Further weakness in the common currency may have to lead to more aggressive rate hikes.
The disappointing reaction from Italian bond yields to the new crisis plan suggests policy makers will need to spend more time trying to convince traders and investors that they’re serious in recognizing the need to prevent spreads from blowing out. With Italian politics back in a state of turmoil, it’s going to be a long, hot summer for the euro markets.
Se a qualcuno, tra i nostri lettori, fosse sfuggito, ricordiamo che di tutto ciò che ha fatto la BCE dieci giorni fa, per noi investitori la cosa di maggiore rilevanza è una sola: ovvero il fatto che la BCE di Lagarde ha deciso di abbandonare la politica di “forward guidance”, che significa anticipare ai mercati finanziari ed agli operatori economici il futuro cammino dei tassi ufficiali di interesse.
Lagarde ha spiegato giovedì 21 luglio 2022 che la BCE non fornirà più indicazioni sulle future mosse in materia di tassi ufficiali di interesse: le prossime mosse saranno soltanto “data-dependent”, ovvero decise all’ultimo momento ed in funzione dei dati che saranno pubblicati nelle settimane precedenti la decisione.
Sei giorni dopo, il medesimo messaggio è arrivato da Jerome Powell per ciò che riguarda la Federal Reserve.
Il che butta i mercati, e gli investitori di ogni parte del Mondo, nella più totale confusione. Non esistono più le linee-guida: mercati ed investitori dal luglio 2022 sono costretti, anche loro, ad essere data-dependent.
Il che rende essenziale disporre di un supporto professionale ed altamente qualificato, allo scopo di effettuare quotidianamente tutte le necessarie valutazioni, dipendenti dai dati in uscita, su tutti gli asset finanziari compresi nel proprio portafoglio.
E’ il punto decisivo, per la gestione del portafoglio, per tutti gli anni a venire (anche se, dobbiamo dirlo, per noi di Recce’d le cose stavano così già dal 2007).
Leggiamo adesso che cosa ha scritto, proprio su questo specifico punto, il Financial Times.
The European Central Bank was unable to react to soaring inflation by raising rates as early as many policymakers wanted because of a commitment to forward guidance that it has now ditched after nine years, according to people involved in the decision. The ECB surprised many economists by raising interest rates for the first time in over a decade by half a percentage point on Thursday, despite having guided until recently that it intended a move of only half that size. Two of the bank’s governing council members told the Financial Times they believed it would have raised rates at least a month earlier if they had not been bound by guidance that rates would not rise until it stopped buying more bonds in early July. “A reasonable number of people on the council wanted to do 25 basis points in June,” said one ECB rate-setter. “Locking ourselves into forward guidance was unhelpful in that respect.” A second council member said the benefit of a June increase was outweighed by “the loss of credibility” that would have resulted from breaking its guidance on the timing of when asset purchases would end, adding: “It tied our hands.”
The insights underline how central banks are struggling to provide reliable guidance on their monetary policy plans after being caught out by the rapid surge in inflation to 40-year highs. In addition, the ECB is grappling with a European energy crisis and political instability in Italy. “Forward guidance has definitely overstayed its welcome,” said Spyros Andreopoulos, senior Europe economist at French bank BNP Paribas. “They kept being surprised by the data, which affected their credibility.” An ECB spokesperson said the council’s June meeting in Amsterdam gave “unanimous” support to leaving rates unchanged and saying it intended to do a 25 basis point rise in July, with a bigger move likely in September. ECB president Christine Lagarde said on Thursday that it had ditched its previous guidance on the size of future rate rises after “front-loading” its exit from negative rates and was now shifting to a “meeting-by-meeting” approach to setting borrowing costs. “We are much more flexible; in that we are not offering forward guidance of any kind,” she said. “From now on we will make our monetary policy decisions on a data-dependent basis, [we] will operate month by month and step by step.”
The decision to ditch forward guidance on rates, which has been an important part of the policy toolkit since its introduction by former ECB chief Mario Draghi in 2013, was broadly welcomed by analysts — even if some were still irritated by how the central bank broke its last stated commitments. “No guidance is better than bad guidance,” said Marco Valli, chief European economist at Italian bank UniCredit. “This will probably raise volatility in rate-hike expectations as markets try to understand the ECB’s reaction function at a time of elevated, supply-driven inflation and substantial weakening of economic activity.”
The ECB is the latest central bank to question the value of providing guidance. The US Federal Reserve last month abandoned its heavily signalled plans for a half-point rate rise only days before announcing its first 0.75 percentage point increase since 1994 after inflation rose by more than it had expected. Fed chair Jay Powell said after the decision that it was “very unusual” to have key data land “very close” to a rate-setting meeting, adding: “I would like to think, though, that our guidance is still credible.”
The Bank of England surprised investors last year by not raising rates when a move was widely expected in November and then raising them when it was unexpected in December. BoE chief economist Huw Pill said earlier this month it would be “unhelpful” to provide further guidance on rates while opinion was split between its policymakers. But a few days later BoE governor Andrew Bailey said its first half-point rate rise since 1995 “will be among the choices on the table when we next meet” in early August.
ECB officials said forward guidance was most useful to signal that rates would stay low for longer once it had cut them below zero and it was buying vast amounts of bonds. “We’re moving away from that world now,” said one official. However, Lagarde did provide some guidance on the future direction of rates on Thursday, signalling more rises ahead. “At our upcoming meetings, further normalisation of interest rates will be appropriate,” she said, adding that the central bank aimed to “progressively raise interest rates to [a] broadly neutral setting. That’s where we want to arrive at”. Lagarde declined to estimate the neutral rate of interest — the optimal level where an economy is neither overheating nor being held back — but other council members put it between 1 and 2 per cent, meaning its deposit rate still has some way to go from zero now. The ECB chief also ditched the word “gradual” in describing its rate-rising plans. She only used the word once in Thursday’s press conference — to describe wage growth — compared with seven times in June.
Council members criticised the concept of gradualism in June, when some said it “could be misleading if it was interpreted as implying too slow or too rigid a pace of adjustment in the monetary policy stance”, according to the minutes of last month’s meeting. Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, suggested that the ECB publish the interest rate expectations of its council members over the next couple of years. This is similar to how the Fed publishes the median rate expectations of its officials every quarter. “The ECB has to come up with a new way of signalling its intention to the market,” said Ducrozet. “Otherwise it will add a layer of difficulty to predicting what they will do in the next meetings.”
Tutto ciò che avete appena letto vi porterà a concludere che siamo appunto entrati in una Nuova Era, che è già stata etichettata “The New Ab-normal”: un’etichetta che a noi piace, perché sintetizza due concetti:
ciò che è stato “normale”, per i mercati finanziari e per le banche Centrali, oggi non è più “normale”
la nuova situazione che ha preso il posto di ciò che era “normale” è così diversa dal passato, ed per molti aspetti così eccessiva, che può essere definita “Ab-normale”
Allo scopo di spiegare con maggiore dettaglio, ci affidiamo a ciò che ha scritto all’inizio della scorsa settimana (come commento alla settimana precedente) la Banca olandese Rabobank.
By Bas van Geffen, senior market strategist of Rabobank
It was a wild ride for Europe this week. Italian PM Draghi resigned, triggering snap elections in the country. These are scheduled for 25 September. The elections will delay talks on the 2023 budget and the implementation of structural reforms. Moreover, a new government may try to renegotiate the reform plans that have been submitted to Brussels for the Recovery and Resilience Facility – although there would appear to be little wiggle room here.
Notwithstanding this political uncertainty, the ECB raised its interest rates by 50 basis points, trying to normalise its interest rates in pursuit of the inflation aim. I’m glad that Lagarde specifically referred to normalising the Bank’s rates policy, rather than policy normalisation in general, because, as we have been arguing, the ECB’s tightening cycle is anything but normal. One would expect that a central bank can do away with unconventional policy as it moves away from the lower bound on interest rates. Look at the Fed, for example, which is already slowly unwinding its QE policy.
Yet, in Europe ‘normalisation’ means an expansion of its unconventional toolkit: alongside the rate hike, the ECB launched an anti-fragmentation instrument under the name Transmission Protection Instrument. Under the TPI the ECB could theoretically buy unlimited amounts of sovereign(-related) bonds, and much of the programme –from activation to purchase volumes– is left to the Council’s discretion. The Governing Council did reassure us that “the scale of TPI purchases would depend on the severity of the risks facing monetary policy transmission,” and Lagarde noted that the ECB “prefers not to use the instrument, but will not hesitate [to do so if needed]”.
That determination may well be tested, though. Markets were initially positively surprised by the unlimited size of the TPI. However, a long list of eligibility criteria relating to sound fiscal and economic policies caused some second-guessing, not in the least part because of the political uncertainty in Italy. The TPI’s conditions don’t sound overly restrictive to us, and there appears to be quite some grey area. However, the market may have to test this before it believes that as well.
Welcome to the new (ab)normal.
Of course, as we have flagged several times before, the ECB is in the uncomfortable situation that the TPI was a prerequisite for a faster, yet still orderly, hiking cycle. Lagarde also admitted this herself, stating that the tool allowed the ECB to “go big”. In addition to the availability of the TPI, Lagarde cited inflation risks, which “have intensified, particularly in the short term”. In other words, the ECB is clearly still concerned about the price developments. This means that the 50 basis points weren’t just a way to get the hawks on board with a less restricted fragmentation tool, and that more Council members may have genuinely wanted a bigger hike based on their assessment of the inflation outlook, although not all doves were convinced: a small number of ECB officials initially preferred a 25bp increase, according to Bloomberg.
After yet another last-minute deviation from its earlier guidance, the ECB has finally given up trying to predict its own next move. The Council dropped most of its forward guidance, including its intentions for September, and has shifted to a “meeting-by-meeting” approach instead. That, arguably, is at least some true normalisation of policy: an ECB that no longer pre-commits.
In light of the hawkish surprise yesterday, money markets are now pricing in a non-negligible chance that the ECB will follow up with a 75bp hike in September. We maintain our 50bp call for that meeting, but we now believe the ECB will follow that up with another 50bp in October.
There are two key assumptions behind this new forecast. First of all, this assumes that the TPI will effectively limit fragmentation risks in the Eurozone. Secondly, this assumes that the economic outlook does not deteriorate too sharply in the next couple of months. We still believe that the ECB’s next set of forecasts will probably require a downward revision of the growth forecasts, as the PMIs today (see below) are yet another indicator that Eurozone growth is losing momentum. That said, it also looks as though the Council’s tolerance towards growth risks has increased as long as inflation remains uncomfortably high. Without further shocks to energy and food commodities, we would assume that inflation will peak and slowly start to recede from early-Q4, which means that the ECB can probably declare job (almost) done after October. Plus, the ECB is so far not forecasting any recession, and the Bank has historically been reluctant to do so. It is therefore quite possible that it takes tangible evidence of one before the ECB stops hiking. We therefore do still believe that a 25bp move in December will be the end of the hiking cycle.
Despite the ECB -yet again- adopting a more hawkish stance, we remain sceptical that it will provide EUR with significant support. For a brief moment it looked like the ECB had struck the right balance with a 50bp hike and ‘unlimited’ TPI: EUR rose above 1.026 upon the release of the press statement. However, as we feared ahead of the meeting, this boost to the currency didn’t last very long.
Tutta intera la vicenda ci lascia in ogni caso una serie di utili insegnamento, sia come investitori, sia in quanto cittadini che consumano e lavorano alimentando la crescita dell’economia.
Tra questi insegnamenti, uno è il più importante di tutti, e per tutti: ne potete leggere nel quarto contributo esterno, che pubblichiamo in chiusura del nostro Post.
In questo articolo, viene spiegato, a nostro giudizio con grande chiarezza, come proprio i fatti che qui stiamo esaminando, e che l’articolo richiama, dimostrano che il grande insegnamento che il 2022 porta, sia ai privati sia alle aziende, sia agli investitori sia ai consumatori, è quello che segue
non è vero che “il denaro a costo zero da parte delle Banche Centrali” non costa nulla: il denaro a costo zero è una politica economica che presenta costi molto elevati, sia agli investitori sia ai consumatori, sia alle aziende sia alle famiglie.
Buona lettura.
The ECB’s announcement on Thursday July 21 of a “new instrument” for tackling “fragmentation risk” is ominous for the future of the euro. The idea is to pre-empt the emergence of serious break-up risk for the euro-zone as the policy interest rate continues to move higher in coming quarters towards “neutral.”
Chief Lagarde and her colleagues are determined to pre-empt this process triggering financial stress in the form of market crisis for weak government and bank paper. Saving the euro from high inflation must go along with saving the monetary union from break-up (fragmentation risk).
The launch of the new instrument and its likely use means “saving the euro” should drain not bolster confidence in the European money. Historians will not overlook the irony of this new likely giant step on the euro’s long journey to inflationary collapse occurring just on the same day as Mario Draghi, Chief Lagarde’s predecessor, renowned for his swaggering remark about “doing whatever it takes to save the euro” being forced to resign as Prime Minister of Italy.
The new instrument, born under the name “transmission protection instrument” (TPI), will be the catalyst to the accelerated full transformation of the ECB into a bloated European “bad bank” fund. This entity enjoys a giant privilege. Its liabilities are in large part the designated money (whether as banknotes or as reserves of banks) enjoying huge protections as such (most importantly legal tender) in all member countries of the European Monetary Union.
In effect, since the EMU crises of 2010-12, the ECB has been the agent which has “communalized” much of the bad state and bank debt of Italy (also Spain, Portugal and Greece). It has done this by issuing euro money liabilities against giant purchases of government paper and long-term lending (called LTROs) into the corresponding weak banking systems (again most of all Italy).
This communalization has created three big problems for the future of the euro:
First: the road back to monetary normality surely involves shrinking monetary base (now almost 50 percent of euro-zone GDP, compared to 27 percent in US). But how to accomplish this when the ECB would have to dump huge quantities of weak sovereign and bank loans on to the open market to achieve this purpose?
Second: as interest rates rise, it becomes increasingly problematic whether those weak borrowers can service their loans from the ECB. New loans to pay the interest are a red flag regarding insolvency danger, whether in the form of legal default, or default by inflation (thereby reducing real value of principle). The European public at some stage should become alarmed about the danger of default by inflation spilling over into their holdings of the money issued by this bad bank fund.
Third: the tolerance of the German public for this transformation of the ECB and its money could snap in a way which means that the Federal Republic pulls out of the union. Germany has been critical in keeping the ECB humpty dumpty together. Partly this critical role depends on public perception (that Germany stands behind the ECB and all its potential losses), albeit there is much wishful thinking here rather than legal fact.
And then there is the target-2 system – in effect an interbank clearing system, but where net balances between the member central banks are not cleared). The Bundesbank’s credit balance here now stands at over 30 percent of German GDP (matched largely by Italian and Spanish net debit balances; France’s balance is at approximately zero),
Germany, though, can walk away – a course which is not absurd given that ECB holdings of loans and government paper issued by weak banks and sovereigns amounts to over 100 percent of German GDP. In the big picture we should note no member country, jointly or severally, guarantees the monetary debts of the ECB. In fact. the only meaningful guarantee here would be a promise to sustain real purchasing power of money.
If Germany exits EMU, then the ECB’s monetary liabilities just become worth a lot less in real terms (via currency collapse and inflation). Ultimately these monetary liabilities might cease to be monetary – that occurs if monetary union comes to an end. Then the monetary liabilities of the ECB would have to find a market price (in terms of real purchasing power) as the paper of a giant bad bank devoid now of monetary function.
No doubt, any break-up scenario has huge costs, including write-offs for the German public. The existential question, though, poses itself: if not now, when? How much larger will these costs be when the decision to break-up is forced much later.
No-one expects the present coalition government in Berlin to be taking any such decision. But market valuations including of money do reflect shifting probability of future catastrophe even far ahead. The dangers highlighted here of ultimate monetary collapse have just got a lot worse due to the ECB’s launch of its new instrument.
According to the official press release on the TPI, the ECB, its own discretion (by vote of its governing council) can engage in unlimited purchases of paper from any member country if it considers the behaviour of its credit spread (say relative to Bunds) as having come out of line “with fundamentals.” In making that determination, the ECB will check with the EU Commission concerning the evolution of public finances in the given country. The ECB will also check for general economic sustainability in its various dimensions.
If, for whatever reason, the Italian spread (Italian government bond yields vs. German) suddenly widens – perhaps because markets distrust the political direction or sense that Italian credit institutions are in a new bleak situation – then the ECB can turn on the taps. Yes, it will sterilize the new lending, that means presumably disposing of German and Dutch paper in the ECB balance sheet to make room for Italian for example, becoming even more of a bad bank.
There are decisive moments in monetary history. The aftermath of July 21 is likely to be one of them as regards the European monetary future. These problems have become a lot worse
The disastrous era of negative rates may be ending but it is not over. Imposing negative nominal and real rates is a colossal error that has only encouraged excessive indebtedness and the zombification of the economy. However, nominal rates may be rising but real rates remain deeply negative. In other words, rates are still exceptionally low for the level of inflation we have.
Negative interest rates are the destruction of money, an economic aberration based on the idea that rates are too high and that is why economic agents do not invest or take the amount of credit that central planners desire.
The excuse for implementing negative rates is based on a fallacy: that central banks lower rates because markets demand it and policy makers only respond to that demand, they do not impose it. If that were the case, why not let the rates fluctuate freely if the result is going to be the same? Because it is a false premise.
Imposing artificially low rates is the ultimate form of interventionism.
Depressing the price of risk is a subsidy to reckless behaviour and excessive debt.
Why is it bad for everyone to keep negative rates?
The reader may think I am crazy because hiking rates makes mortgages more expensive, and families suffer. However, you should also ask yourself why house prices rise to unaffordable levels. Because cheap borrowing drives higher indebtedness and makes asset prices significantly above affordability levels.
First, prudent saving and investment are penalized and excessive debt and risk-taking are promoted. Think for a moment what kind of business is the one that is viable with negative rates, but not with rates at 0.5%. A time bomb.
It is no accident that zombie companies have soared in an environment of falling interest rates. A zombie company is one that cannot pay interest on debt with operating profits, has negative return on assets, or negative net investment. According to a study by the Bank of International Settlements, the percentage of zombie companies has risen to all-time highs in the period of low rates.
Zombie companies are less productive, riskier and may create a systemic problem. Furthermore, negative rates curb creative destruction, essential for progress and productivity.
In the case of governments, negative rates have been a dangerous tool. They have made it comfortable to take on vast amounts of debt and make deficits skyrocket.
A policy designed as something exceptional and temporary was extended for more than a decade leaving a trail of inefficiency, malinvestment and excess debt.
A policy designed to buy time and conduct structural reforms has become an excuse to avoid them, take more debt and increase imbalances.
But negative real and nominal rates disguise risk, giving a false sense of solvency and security that quickly dissipates with a slight change in the economic cycle. These extremely low rates generate greater problems as risk accumulates above what central banks and supervisors estimate, starting with governments themselves.
Negative rates have fuelled the public debt bubble that will end with higher taxes, higher inflation, lower growth, or all of them together.
Of course, the other effect of this economic aberration is high inflation, the tax on the poor. For years it has generated enormous inflation in assets, by encouraging risk taking, from the real estate sector to the multiples of industrial assets or infrastructure. Borrowing was unusually cheap and when credit soars, it flows towards high-risk assets and, of course, the creation of bubbles.
It is surprising. The entire economic consensus recognizes that the rate cuts of the early 2000s led to the bubbles that cemented the excess of risk prior to the 2008 crisis. However, that same consensus applauds the madness of negative rates because there is a perverse incentive in statism when the bubble is sovereign debt.
After the high inflation in assets, high inflation of consumer prices has arrived, a double negative effect for savers and real wages.
The European Central Bank has raised rates… to zero! The biggest increase in 22 years and the first time without negative rates for eight years. With inflation in the eurozone at 8.6%, it is clearly an insufficient and timid rise.
Interest rates are the cost of risk and with these rates the policy of central banks continues to penalize savings and prudent investment in real and nominal terms, while risk-taking is encouraged.
It is amazing to read that some think it is imprudent to raise rates… to zero! with core inflation at levels not seen since 1992.
Will mortgages go up in Europe? Of course. But it seems incredible to me that the economic debate is on whether 40-year mortgage rates go to 2% instead of why they were at 1.2% in the first place.
When you worry about the cost of a new mortgage going up, think that house prices have skyrocketed well above what we consider affordable precisely because of negative rates.
Hardly anyone buys something they cannot afford taking debt if the interest rate reflects the genuine cost of risk.
Bubbles and credit excesses always occur after a planned incentive such as artificially lowering interest rates and injecting liquidity above the real demand for currency.
Of course, when bubbles burst, interventionists never blame the artificial lowering of interest rates or printing money… they blame “the market”.
Cheap money is expensive. The problem for the next few years is not going to be adapting to rates that will continue to be exceptionally low, but to realize the excess risk accumulated in the era of monetary insanity.
Those colleagues who recommend central banks to be “prudent” and not raise rates too quickly should have warned of the madness of lowering them at full speed until reaching negative levels.
If rates fluctuated freely, the creation of bubbles and excesses of debt would be almost impossible because the risk would be reflected in the cost of money.
The best way to prevent financial bubbles and crises is not to encourage excess risk and debt by artificially lowering rates.
Rates do not have to be hiked or cut by a central planner. They need to float freely. Anything else creates more imbalances than the alleged benefits they promote.
