Monetary policy

The consequences of the new environment of financial conditions: entering uncharted territory

Monetary policy at a crossroads As we have seen in the first article of this Dossier, all the indicators suggest that interest rates will remain at relatively low levels over the next few years. In this context, central banks are expected to have less room for manoeuvre if they continue to operate with traditional tools. In fact, various studies (see the first chart) show how lower interest rates will lead to the monetary authorities hitting the zero lower bound much more frequently . 1 As an example, two macroeconomists from...