Compared with the zero interest rate policy, medium-term interest rates under quantitative easing are lower and their volatility is smaller on average. In fighting against deflation under zero interest rates, we have found that the constraint of zero interest rates on monetary policy is an important issue for central bankers around the world.
Two episodes – one in the late 1980s and one in the mid-1990s – stand out. In both, a sharp rise in the inflation rate was followed by a decline in the growth rate. This was quite pronounced in the first episode and somewhat moderate, though unmistakable in the second.