Fed economists’ study warns of future episodes of ultra-low rates - FT

The Financial Times (FT) reports about a study to be presented at the Brookings Papers conference this week by two Federal Reserve Board economists, which warns that the global central banks will be stuck in an era of near-zero levels in the future.

Key Points:

Suggests policymakers should allow prices to rise by around 3% annually during periods of high economic growth

So the long-run average annual target of 2% is achieved after several years of lower inflation

Keeping interest rates low while inflation spikes, presumably with output and wages also rising above potential, would "make up" for the accumulated effects of the long downturn in growth and inflation in the past decade

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