Definition of leaning against the wind

Leaning against the wind, or sometimes, leaning into the wind, in economic terms refers to a  countercyclical monetary policy where central banks take action to damp down inflationary booms or to boost growth when the economy is flagging.

In June 2005, Jean-Claude Trichet, president of the European Central Bank, described leaning against the wind in the following terms:

"The leaning against the wind principle describes a tendency to cautiously raise interest rates even beyond the level necessary to maintain price stability over the short to medium term when a potentially detrimental asset price boom is identified."

"It should be mentioned that leaning against the wind has the advantage that it can to some degree ameliorate the moral hazard problem of the purely reactive approach to asset price boom-bust cycles. By reacting more symmetrically – i.e. being tighter in booms as well as looser in busts – the central bank would discourage excessive risk-taking and thereby reduce over-investment already during the boom. This in turn would lead to a lower level of indebtedness and less severe consequences of a possible future bust," he added.

 

leaning against the wind in the news

In March 2012 a senior economic policy adviser at PwC said that central banks, by continuing to tolerate phases of relatively high inflation were raising questions about their commitment to price stability. Instead, he recommended leaning against the wind of high energy and commodity prices by seeking to influence the exchange rate and expectations of price increases. 

In July 2012, an economist said that if the European Central Bank reactivated the securities market programme for bond buying in order to lower Spain's borrowing costs that it would mean it would be "leaning against the wind" but with overwhelming force.

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