Without a doubt, it is a completely incorrect expression. Although I admit that low, even zero, interest rates can be misleading. And this perception—”free” money versus the reality of “historically favourable credit conditions”—is one of the many risks central banks are taking with their extreme monetary measures. Ultimately, it leads economic agents to take on excessive risk in the face of such loose financing conditions—conditions which, moreover, are in theory essential for the economic recovery to deepen and thereby achieve the inflation target.
But is it really a matter of the cost of financing to achieve it? Frankly, I do not think so. Interest rates are the price of borrowing money. And money, in abundance, is the key to increasing inflation. Yet, eight years after these extreme measures began to be implemented worldwide, inflation expectations are not rising. And this coincides with moderate global growth, closer to stagnation from a historical perspective. What is the problem? The weight of the financial sector in financing the economy is declining in favour of wholesale funding, clearly benefiting from a monetary policy that uses traditional instruments (interest rates) and exceptional ones (purchases of financial assets).
