Global Courant
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What then characterizes balanced economic development?
For example, a systematic increase in material inequality can hardly be reconciled with this, and there is much evidence that low interest rates lead to greater inequality. The low interest rates of the past ten years have led, among other things, to the stock index tripling and the housing and real estate index to almost double. This should come as no surprise.
Low interest rates mean that investors are increasing their investments in stocks and it is becoming virtually free to consume housing and real estate.
Increased inequality in turn leads to demands for tax increases that are not always consistent with balanced economic development. These imbalances can largely be attributed to the inflation target. Because the inflation target means that if inflation is low, interest rates must also be low.
In periods of low inflation, central banks are therefore forced to maintain interest rates so low that they can hardly be defended as the “natural interest rate”.
Maybe it’s time to reconsider the inflation target?
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Time to reconsider the inflation target?
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