Policymakers must prepare for era of low interest rates: Fed

This article is more than 12 months old

May 15, 2019 06:00 am

Tortuously slow recoveries from recessions and low inflation are here to stay unless policymakers can get a better grip on how to stabilise the global economy in an era of lower interest rates, a top Federal Reserve policymaker said yesterday.

"Experience teaches us that it is better to prepare for the future than wait too long," New York Fed President John Williams said in remarks prepared for delivery at a policy conference in Zurich, Switzerland.

"Ultimately, failure to prepare often means preparation for failure," said the US official.

Lower birthrates are keeping population growth down in the world's wealthier economies and technological advancement has shifted down to more normal levels. Each trend is capping how much economies can grow, Mr Williams said.

The lower growth leads to less investment and ageing populations in those advanced economies increases savings. Lower demand for and a higher supply of savings has reduced the "neutral" level of interest rates around the world that would, in theory, not restrict or heat up the economy. - REUTERS