Is US or Eurozone monetary policy restrictive, or will it become restrictive? Analysts at Natixis look if the two conditions for monetary policy to become restrictive are met. 

Conditions for monetary policy to become restrictive

“For monetary policy to be restrictive: The real interest rate (calculated with core inflation or with the GDP deflator) must be higher than potential growth; Mortgage rates must be higher than the per capita wage growth rate.”

“In the US, the real long-term interest rate is still well below potential growth, but the mortgage rate is higher than nominal wage growth. It is normal to see a significant downturn in residential investment; monetary policy is therefore partially restrictive.”

“In the Eurozone, the real long-term interest rate is well below potential growth, and the mortgage rate is lower than nominal wage growth; monetary policy is therefore completely expansionary.”