Eurozone policy transmission ‘more pronounced’ in 2022–23 – study
Banks’ increased risk perceptions underpinned swifter pass-through, says Bank of Italy research
The unprecedented tightening of monetary policy by the European Central Bank (ECB) in 2022–23 was matched by a more rapid transmission of higher rates into credit markets, according to research by the Bank of Italy.
The paper compares the recent tightening with that of 2005–07, when the pass-through rate was far less pronounced. Banks during much of this period were far less risk-averse, and only began to tighten lending standards at the end of 2007 after the US housing bubble had burst.
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