Ageing populations will impact CB policy: Trichet
Aside from the impact on real interest rates, Jean-Claude Trichet, the president of the European Central Bank, said population ageing and the consequent escalating wealth-to-GDP ratios could mean the wealth channel is more important for the transmission of monetary policy actions.
Speaking in Maastricht last week, Trichet said: "These developments are important, and all central banks in the world are carefully studying these slow-moving forces as they unfold at their glacial pace." But he added that sound fiscal management was the most important policy tool in ensuring economies can cope with an older population."
Trichet urged governments to deal with the problem as soon as possible: "The longer we wait to implement appropriate structural reforms, the more difficult it will be to counteract the possible adverse effects of population ageing on Europe's future growth and prosperity."
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