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.
Sentiment: POSITIVE
Monetary policy itself cannot sensibly be directed at reducing imbalances.
I'm just opposed to a pure inflation-only mandate in which the only thing a central bank cares about is inflation and not employment.
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 real problem is deflation. That is the opposite of inflation but equally serious to the borrower.
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.
It would be helpful if someone would lay out exactly the economic mechanism that gets us from yet lower interest rates to actual economic activity.
I have never believed that central banks should have rigid inflation targeting. That is not a good thing to stabilize. There is nothing in economic theory to back this.
The central bank needs to be able to make policy without short term political concerns.
There are limits to monetary policy.
Monetary policy has less room to maneuver when interest rates are close to zero, while expansionary fiscal policy is likely both more effective and less costly in terms of increased debt burden when interest rates are pinned at low levels.
No opposing quotes found.