Money creation can have unpredictable consequences

Between the financial crisis and the COVID-19 crisis, the monetary base grew significantly faster than the money supply both in the euro area and in the United States, yet inflation did not accelerate in the expected manner.

This may become problematic if policy interest rates later need to be raised sharply. The stronger inflation currently observed in the United States compared to the euro area can be explained, among other factors, by more expansionary fiscal policy and a lower unemployment rate. (AI translation)

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