For years, central bankers in the developed world have been trying to battle poor economic growth and weak demand with ultra-low, and even negative, interest rates. It’s not working. More than 17 years after Japan cut interest rates to zero, and eight years after the financial crisis prompted central banks in the US and Europe to slash their policy rates to record lows, growth has stubbornly refused to recover to pre-crisis levels and deflation remains an ever-present threat. The response among central bankers has been to cut further, defying all historical precedent to push interest rates into negative territory.
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Attempts to conjure growth and inflation
Devastating financial crisis
Encourage spending and investment
Excessive leverage force to unwind
Expansion on leveraging
Negative effects on growth
Policy tools to counter deflationary pressures
Productive capacity of economy
Rate of economic growth
Real trend
Returns on capital
To battle poor economic growth
To recover to pre-crisis levels and deflation
To spur weak demand with low interest rates