Historically, central banks have been using interest rate policy to control inflation.

In current times, most rates have been going ever lower, but it seems to be incapable of driving inflation up.

Do cheap loans really encourage people to start and expand businesses, or at least increase consumption? In my own country, Canada, it seems that all that those cheap loans do, is encourage buying more expensive homes.

Would the average citizen really use loans to increase consumption, buy cars or holidays? I may be wrong, but I would guess most people are reluctant to borrow for something that is not a home?

If that is the case, would it not mean that setting interest rates is no longer an effective monetary instrument when it comes to consumer price inflation?


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