Central banks may be partly to blame for low real rates, says BIS’s Borio
Rate cuts may fail to generate inflation while destabilising the economy
Ever-easier monetary policy could be pushing down on real interest rates, creating a feedback mechanism and generating instability, the Bank for International Settlements' (BIS) Claudio Borio said today (November 29).
Central bankers tend to protest they are hostages to the movement of real interest rates, which are driven by factors beyond monetary policy's control. As the equilibrium rate falls, the policy rate is dragged ever lower in an effort to keep inflation at target. Among others, Bank
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