A term that emerged after 2005 for an approach by the central bank that refrains from interest rate hikes because – these now attract too much public attention, – in the event of an interest rate hike, they lead to an outcry from lowbrow politicians and foolish newspaper hacks, and – this puts the central bank’s governing bodies under public pressure. – For example, in the financial crisis that followed the subprime crisis, the ECB – bought covered bonds – including the German Pfandbrief – from banks in the euro area, – extended the maturities for refinancing operations to twelve months,- allowed a wide range of collateral with significantly lower credit ratings than in normal times, and – extended unlimited liquidity to institutions at a fixed interest rate. Each of these measures could be withdrawn by the central bank fairly unobtrusively, without touching the policy rate and without awakening very unpleasant poltergeists. – See instructions, monetary, purchases, central bank, prime rate, carry trades, guidance, verbal, money, cheap, greenspeak, crisis, central bank-influenced, policy rate, low interest rate, zero interest rate, open mouth policy, quantitative easing, repression, financial, signaling, TARGET abuse, tender, special, fuzziness, constructive, away inflation, interest rate allocation function, interest rate floor. – Cf. ECB Monthly Bulletin of August 2009, pp. 37 et seq. (effects of the first longer-term refinancing operation with a one-year maturity), Deutsche Bundesbank Monthly Bulletin of August 2009, p. 46 (purchase of covered bonds by the ECB; overviews).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/