But can we say this has much to do with monetary policy settings? Our real interest rates have averaged around –0.5% since 2009, reflecting accommodative monetary conditions. Meanwhile, household spending has slowed amid 7 greater emphasis on working down household debt levels.
First, incipient monetary divergence could butt up against domestic or external limits. For example, the Fed could decide that dollar appreciation or deterioration of international conditions could detain U.S. economic recovery. 2  For the estimation of Taylor rules, see BIS (2015). “85th Annual Report, 1 April 2014–31 March 2015,” June, p. 92.