Interest Rates down to 1%

[Robbie G]

In a couple of years I'm sure we'll look back at 1% interest rates as a golden age.

Once rates fall close to 0 and then the only thing the central bank can do is print money, and high inflation will be back in spades... 8%, 9% wouldn't be surprising, maybe over 10%. Bag a long term fix as soon as you can I think.

The goal of the central bank is to tackle inflation (short term stability is a side issue). I can't see why they would print money if it then lead to inflation (assuming the current remit). The 0% interest band is slightly worrying in that it leads monetary policy pretty useless. Assuming 0% interest rate, monetary policy would have to have another tool to be effective. Otherwise, fiscal policy would be the only way, which is why these big spends by the government are being planned.

 

[sten_super]

We are dangerously close to a Japan-style situation. I don't want to think what the implications would be if we had a 'lost decade'.

 

[sparkie]

The goal of the central bank is to tackle inflation (short term stability is a side issue). I can't see why they would print money if it then lead to inflation (assuming the current remit). The 0% interest band is slightly worrying in that it leads monetary policy pretty useless. Assuming 0% interest rate, monetary policy would have to have another tool to be effective. Otherwise, fiscal policy would be the only way, which is why these big spends by the government are being planned.

I think we're going to hear a lot of 'quantitive easing' in the next few weeks. The trouble is that it is easy to do too much of this with a very real danger of hyper inflation resulting.