As you know, last December I put the question this way: “...how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions ...?” We have not been able, as yet, to provide a satisfying answer to this question, but there are reasons in the current environment to keep this question on the table.
In fact, the opposite is more likely to be true: lower rates tend to promote reforms, since they lead to a better macroeconomic environment.13 This is especially useful for countries without the fiscal space to support demand.