There could be reason to believe low-rate monetary policy is having less influence on stimulating growth and inflation as it once did
ORIGINALLY PUBLISHED in Canadian Mortgage Trends : Monetary policy has always been a panacea for ailing economies, rarely more than during the financial crisis of 2007-08. It’s a simple concept: lower the cost of borrowing for consumers and businesses and you stimulate the economy and, as a side effect, inflation. Monetary policy easing was used heavily following the financial crisis 10 years ago by countries around the world, including the U.S. and to a lower extent Canada. The textbook cautionary tale of interest rate easing, however, is Japan, which dropped its interest rates to near-zero in the early 1990s, where they have since remained for two decades and counting. Some are now starting to question whether low interest rates are as effective as they once were to stimulate economic growth, saying central banks no longer have the same ability to control inflation, spending and employment through traditional means as they once did. Lo...