In particular, the development of energy prices was due to inflation in the euro area; On the Voxe website, Paul de Grauwe and Yuemei claim it, with the signaling effect of a monetary policy would only make sense if economic entities did not understand the essence of inflation development. So how to evaluate the steps of ECB IS in view of their costs?
Economists recall that central banks have passed «from the lack of reserves to excess reserves» before the high inflation period. This happened as a result of the so -called quantitative release, within which the central bank was purchased by a huge number of government bonds from banks and other financial institutions. The second coins will be a dramatic increase in banking reserves (ie banking deposits held at the central bank). As a result of this regime of excess reserves, the interest rates on the money markets fell to zero. In 2022, the interest rates were forced to increase interest rates in 2022 in efforts to reduce high inflation. And «Reserves' interest rate has become a new lower rates on the cash market». With each increase in rates, central banks had to increase payments to banks from previously created reserves. «For the whole period since the increase in interest rates in September 2022 until January 2025, these transfers reached 270 billion euros. For the idea: EU's annual expenditure is EUR 168 billion. These expenditures are the result of complex and often demanding decision -making processes and are accompanied by a number of conditions for those who are recipients. The political decision -making process and without any obligations, ”writes de Grauwe. And it continues: “Interest profits from reserves in 2023 and 2024 were more than half of the net profit of banks. They are also two years when euro area banks have reached record -high profits. It should be emphasized that interest rates on reserves had an extraordinary impact on the total profits. With each increase in the rate, the profits increased without the banks had to do anything… The data show that the interest transfers described in 2023-2024 more than double the euro area profits. «The total losses of these central banks reached almost € 70 billion in 2024. As a result, these central banks stopped transferring annual profits to national cash registers… Many of them even announced that they would not send anything to the national treasury for many years.» Economists therefore claim that «the anti -inflation policy of the ECB has been extremely expensive. The price paid for the fight against inflation is in the order of several hundred billion euros. The ECB contribution to lower inflation is minimal. In addition, economists add that others can be considered on these costs. Since the fourth quarter of 2022, there has been a slight increase in the growth rate, which may seem surprising. «But in fact, this is not the case for two reasons. First, a sharp drop in energy prices since the beginning of 2023 has acted as a positive offer shock. He also led to an increase in real disposable consumers' consumers. the result of described transfers to banks. «As the ECB raised the interest rate, they also made increasing interest transfers to banks. They resulted more than double their profits and increased their own capital of banks. This motivated them to reduce credit standards and/or increase loans' offer. The bases of currency policy have become less effective in reducing aggregate demand and inflation. Overall, economists say the ECB should have changed the reserves' interest system. And they recall that the ECB even applied a system in 2019–2022 where the reserves carried a negative rate. «Banks had to pay 0.5 % of their deposit accounts at the central bank. Banks did not like it and the ECB suggested a stepped system to comply with the banks. In this step system, part of the banking reserves were exempt from interest fees.» Source: Voxeu