I have been thinking about what the Fed may do interest rate wise now and in the future. I have always thought they would try and raise rates which would be pushed back due to economic weakness. I am starting to think that a new fiscal theory may be evolving world wide, namely low rates are good but very low or negative rates are counter productive. Although counter intuitive optimal interest rate level may be 1 per cent rather than zero. IMO the Fed may push rates to this level but no higher and even keep them at this level regardless of the economic environment.
It appears central banks have really lost interest rate manipulation as a tool to stimulate economic activity which leaves them with expansion of the money supply as their only tool. Expect more quantative easing as a response to stock market shocks or economic weakness.
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