Keeping policy rates persistently low: Implications for the monetary transmission mechanism

Central banks responded to the financial crisis by cutting policy rates to prevent deflation and curb the decline in economic activity, but these responses have been anything but temporary. This column explores whether the sticky price channel is still relevant in an environment of persistently low rates. Although the effectiveness of the sticky price channel is limited, monetary policy instead transmits through mortgage debt. The recent period of low rates and low inflation has redistributed income and consumption from savers to mortgage borrowers.

Σχετικές Αναρτήσεις

• Reinhart, Carmen, (2016), “What’s New About Today’s Low Interest Rates?”, Project Syndicate, 28 Ιουλίου
• Demary, Markus, (2016), “Why the ECB is not to blame for low interest rates”, LSE Europpblog, 22 Αυγούστου