Four things are important about this. First, there is a clear signal here that if rates rise in the UK it is not going to be my much: assuming inflation remains low (and I think that will be the case) he thinks to 1% in real terms the long term, which may be little more than that in actual terms.
Second, that implies that in effect monetary policy – which requires scope for changes in bank rate – is dead as a tool for delivering economic policy.
Err, no. A change in monetary policy could be done through a change in the bank rate, that’s true. But monetary policy is still there even if there is no change: for whatever the rate is is a monetary policy.
And it’s not necessary to conduct monetary policy through the bank rate of course. There’s this thing called quantitative easing for example. There’s even that monetisation of fiscal policy which is PQE which is also a monetary policy.
It’s the SuperMurph’s standard problem. Because he doesn’t understand the basics he falls into all sorts of error.
Actually I thought the Murphmeister had a reasonable point there (for a change). He simply said that since interest rate changes might no longer be a very effective weapon, central banks will have to do something else: e.g. “monetise fiscal policy” which close to PQE – a point which Tim himself makes above, and with which I agree.
Can somebody explain to me the difference between real and actual? In my world they are pretty much the same. Maybe I should ask Richard Murphy.
Not much posting on this issue Tim. Perhaps your followers have no idea about what you’ re on about?