Will central banks soon be faced with a conflict of objectives?

- "Central banks (in the United States, the United Kingdom and the euro zone) have to maintain expansionary monetary policies because the economies are still weak, because the financial situation of some economic agents (households, banks in some countries) is still poor, and to make it easier to finance fiscal deficits."
- "Other central banks (Switzerland) are trying to prevent an appreciation of their currency. Liquidity will therefore remain very abundant, and the holders of liquidity (banks, other investors) will probably be tempted to use it to buy more profitable assets in the future."
- "We believe that:
• this will not include assets whose prices are weakened by the anaemic growth in OECD countries (equities, corporate bonds, commodities);
• it may include emerging-country assets, but these assets are not very attractive in periods of high risk aversion;
• more probably, we will see (can already see?) a property price bubble arising, as real estate returns are currently attractive in many countries, given that real estate is perceived as a hedge against future inflation, even in the long term."
- "Central banks may therefore be faced with a conflict of objectives, i.e. between the need to shore up economies, banks and countries, and the renewed appearance of property price bubbles."
Natixis Flash Economics 358 20100713

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