However, it may become increasingly diﬃcult for central banks to exit from their accommodative monetary policy in a timely manner, as higher interest rates are not likely to be to everyone’s taste. 3.2 Risk of fiscal dominance Given the increased levels of debt, monetary policymakers could subsequently face growing pressure to keep interest rates low for longer.
This would give rise to the threat of ﬁscal dominance, as economist Michael Woodford calls it, which he deﬁnes as pressure on the central bank to use monetary policy to maintain the market value of government debt. [12] A dangerous dynamic could be introduced into the regime.