Impact of Monetary Policy on Luxembourg

A new IMF report says that “Accommodative monetary policy has contributed to the performance of the Luxembourg economy through some expansion of aggregate demand and through its impact on the financial system. Banks have remained profitable and interest margins stable, while fee and commission income from fund and other activity has been healthy. The investment fund industry has benefited from various factors such as portfolio rebalancing, search for yield, and other market developments leading to strong inflows into various classes of investment funds, and through strong valuation effects. Scenario analysis suggest that the fund industry could be adversely impacted by sharp interest rate increases and that, because of interconnections, the banking system would also be affected. Margins of some banks could also decline when interest rate normalize. Against this backdrop, it is important to implement all 2017 FSAP recommendations that will contribute to making the financial system more resilient to shocks, including those arising from faster-than-expected monetary policy normalization.”


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Labels: Inclusive Growth


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