Fed’s Fischer says fiscal, regulatory measures best cure for global low interest rates

• July 31, 2017
• realestate
• Business & Markets, Real Estate Finance, World News

Monetary policy must take a back seat to fiscal and regulatory measures in the struggle to get the global economy out of its low-interest-rate doldrums, said Federal Reserve Vice Chairman Stanley Fischer, on Monday.
Interest rates are not only near historic lows in the U.S., but also in the euro area, the U.K. and Japan, Fischer noted in a speech at a conference in Brazil.
Although central bankers often talk about the dangers of high interest rates, too-low interest rates are a worry because, in part, it suggests “that the growth potential of the economy may be limited,” Fischer said. In addition, low rates can raise financial stability concerns as investors reach for yield.
Low rates are fostered by slower trend growth, aging populations and weak investment, Fischer said.
Tax, spending and rules for business are better tools to boost productivity growth and the longer-run potential of the economy, he said.
“This statement is true not only in the U.S., but around the world,” he said.
Interest-rate policy is not “irrelevant,” but should focus on being “transparent” and “sound,” he said.
If a central bank can engineer sound policy, then older workers won’t feel the need to save most of their income and instead, invest. This, in fact, will help push interest rates higher, he said.
Although his focus was on the global economy, Fischer did indirectly address the political gridlock in Washington, saying elevated political uncertainty has played a role in the “tepid” increase in capital spending in the U.S.