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This proposal is ridiculous, if honest, or it is instead a dishonest attempt to add to the power of governments. To deal with a recession, it's plausible that
by radford-neal 7y ago
This proposal is ridiculous, if honest, or it is instead a dishonest attempt to add to the power of governments.
To deal with a recession, it's plausible that the central bank might want to produce some inflation - if you think that "sticky wages" are an issue (ie, that people don't want their pay cut even if deflation means that its purchasing power would be maintained, making it difficult for employers to address unemployment by cutting wages and then hiring more people).
But a central bank can easily (very easily) cause inflation without needing to impose any particular interest rate. The central bank simply needs to buy assets using money it creates. This is standard practice. The assests are typically government debt, but they can be anything, if necessary. There is no doubt whatsoever that buying sufficient assets with newly-created money will cause inflation.