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Monetary policy is like juggling six balls... it is not 'interest rate up, interest rate down.' There is the exchange rate, there are long term yields, there are short term yields, there is credit growth.

The impact of low interest rates is broad and deep. Many Americans rely on interest income from their savings to help cover their cost of living.

Stronger productivity growth would tend to raise the average level of interest rates and, therefore, would provide the Federal Reserve with greater scope to ease monetary policy in the event of a recession.

However, in spite of the general perception that monetary policy should be conducted so as to avert deflation, a central bank cannot lower interest rates below the zero lower bound.

Low interest rates are usually attributed to low inflation, weak economic growth and super easy monetary policy. But there's another deep-seated factor that doesn't get much attention: demographics.

I will say this: the central banks can actually support growth beyond a point. When there is no inflation, they can cut interest rates, and that is the way they support growth, but if you cut interest rate to the bone, there is nothing more to cut. It is very hard to support growth beyond that.

The supply-side effect of a restrictive monetary policy is likely to be perverse, in that high interest rates enter into costs and thus exert inflationary pressure.

Beyond monetary policy, fiscal policy has traditionally played an important role in dealing with severe economic downturns.

Interest rates are used to achieve overall economic stability.

Should that worse scenario materialize, then most probably our propensity to increase interest rates will be weaker.