Dorian Henricot

Monetary Policy

Division: Monetary Analysis
Current Position: Senior Economist
Fields of interest: Macroeconomics and Monetary Economics,Financial Economics
Email: dorian.henricot@ecb.europa.eu

Biography

Education: 2018-2023
PhD in Economics, Sciences Po Paris; 2016-2017
Master in Economics, Barcelona Graduate School of Economics; 2009-2013
Master in Engineering, Ecole Polytechnique
Professional experience: 2022-
Economist, European Central Bank; 2017-2021
Economist, Banque de France; 2013-2015
Consultant, McKinsey & Co

ECB publications

18 June 2025

ECONOMIC BULLETIN - ARTICLE

The transmission of monetary policy: from mortgage rates to consumption

Economic Bulletin Issue 4, 2025

English

Abstract: This article analyses the transmission of monetary policy to consumption via its impact on mortgage payments. Simulations using the current distribution of loans across households show that, despite rate cuts, a substantial part of past tightening is still in the pipeline. The average interest rate on outstanding mortgages is expected to continue to increase, translating into a persistent drag on the expected consumption recovery. Lower-income households were affected earlier in the cycle and will be the most affected by 2030 in cumulative terms, disproportionately weighing on consumption due to their higher marginal propensities to consume. The estimates suggest that up to 35% of the overall impact on consumption via this mortgage cash flow channel has not materialised yet. This delayed drag distinguishes the current easing cycle from previous ones. It reflects (i) the fact that the latest hiking cycle started after a long period of low rates, (ii) the less complete pass-through of hikes due to the higher share of fixed-rate mortgages and the pace and magnitude of the tightening cycle, and (iii) the outlook for the current interest rate cycle, which is expected to leave interest rates on new loans at higher levels than before 2021.
JEL Code: E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G51 : Financial Economics

28 May 2025