"No escape from the zero lower bound for top central banks

" No escape from the zero lower bound for top central banks - IMF says \r\n Interest rates eventually should fall back to levels seen before the outbreak of COVID-19, with advanced economies again within sight of the \u201czero lower bound\u201d and developing countries seeing rates in steady decline, the International Monetary Fund ( IMF ) said in a new analysis of whether the \u201cnatural\u201d rate of interest was changed by the pandemic. \r\n Though rates are high now as major central banks battle inflation, \u201cwhen inflation is brought back under control, advanced economies\u2019 central banks are likely to ease monetary policy and bring real interest rates back toward pre-pandemic levels,\u201d IMF analysts said in research released as part of the latest\u00a0 World Economic Outlook . \r\n The so-called \u201cnatural\u201d rates of interest, an anchor for monetary policy that neither stimulates nor discourages economic activity, \u201cwill remain low in advanced economies or decline further in emerging markets,\u201d the IMF concluded. \r\n If accurate, that means less fiscal pressure as government will be able to borrow more cheaply. But is also means central banks, particularly in developed countries, may again have to rely on bond buying and other strategies once some future downturn prompts them to cut policy interest rates to zero. \r\n Some economists have argued the pandemic shifted the natural rate of interest higher, reversing forces like globalization that helped keep borrowing costs low and also driving up government debts to historic levels. \r\n The IMF said it is possible things have changed, and noted that the impact of developments like the transition to a less carbon-intensive economy remain to be seen. \r\n But the fund said its analysis suggests that current high rates \u201care likely to be temporary.\u201d \r\n Once rates normalise at prior low levels, a deep enough recession may force central banks \u201cto resort to the same strategies they employed in the decade before the pandemic, such as balance sheet policy and forward guidance.\u201d "

"No escape from the zero lower bound for top central banks

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