Not exact matches
With the global economy «floating on an ocean of credit,» the current acceleration of credit
via central bank policies will likely produce a positive
rate of real economic growth this year for most developed countries, PIMCO chief Bill Gross writes in his latest monthly commentary, but «the structural distortions brought about by zero bound
interest rates will limit that growth and induce serious
risks in future years.»
The end goal is to improve housing demand
via lower
interest rates and spur capital spending and
risk taking.
Given term premium suppression (
via QE) reduced volatility and induced investors to buy risky assets to boost returns, a sustained rise in long - term
interest rates would give investors more options to achieve yield targets, thus making
risk assets appear less attractive and ultimately erode demands for yield and tighten financial conditions.
For creditors to be able to produce credit, the cost of default
risk must be compensated, and this is done
via the price of credit, the
interest rate:
These include 1) reducing the
risk of recession; 2) reverting to quantitative easing; 3) moving away from inflation targeting; 4) using fiscal policy to replace monetary policy; (v) using fiscal and monetary policy together in a bid to introduce so - called «helicopter money»; and 5) pushing
interest rates higher through structural reforms designed to lower excess savings, most obviously
via increases in retirement age.