Bringing in the macroeconomic effects In any case, a balanced assessment of the distributional effects of monetary policy cannot focus only on its short-run financial effects. It must also include its more slow-moving macroeconomic effects. Even if low interest rates and high asset prices do worsen short-run inequality, they have positive distributional effects over the medium term.
They lead to stronger aggregate demand, a faster fall in unemployment and medium-term price stability, all of which reduce inequality in the ways I described above. The income gains support firms’ profitability, which ultimately sustains higher investment.