This supports balanced and sound growth, inter alia by ensuring that the relative prices of the factors of production are reasonably aligned with their true scarcities. Previous experimentation with negative real interest rates in the 1970s and 1980s contributed to suboptimal allocation of scarce capital, excessive capital intensity in production and weak growth outcomes.
Avoiding this obvious pitfall is a very important contribution which monetary policy can make, at the same time helping to ensure fair returns to savers and combating the deterioration in the national saving rate. What monetary policy cannot do Unrealistic expectations regarding what monetary policy can do abound.