Inflation and Interest Rates
Central banks across the world have been going in separate ways. For example, England and the Federal Reserve are moving away from easy monetary policy while European Central Bank (ECB) may need to be a little more strict in order to keep the European economy away from deflation.
When looking at the past decade, you'll notice that the ECB has had a significantly lower projected interest rate at about 1% while the Fed is closer to 3% and the Bank of England is closer to 2.5%. While the Fed and England both project to be much closer to normal rates, they still have some ways to go, as they are currently at 1.2% and 1.7%, respectively. They are expected to still be just around 2% in the next few years.
These rates to have a positive to them: economies need to avoid debt. With these lower interest rates, it allows central banks a little more "wiggle" room. Economies are currently running at full tilt with the real interest rate at low levels. In addition, rising inequality also adds to how money is no being used. As the rich get richer, they save more of their income (as they don't need to spend as much, meaning consumption actually decreases).
Central banks are more responsible, however, for the low inflation rate. Even though prices have been more stable, the interest rates have fallen due to borrowers not needing to worry about changing inflation rates. Prices have been relatively the same for the past few years. So while it is an accomplishment that central banks have set inflation rates of about 2% per year, it also leads to some issues.
Some options to get out of this tricky situation are to increase the inflation rate target to 3% (decreasing unemployment) or possibly to just try and promise to not tighten anything up until inflation is back to projected levels (about 2% currently).
http://www.economist.com/news/finance-and-economics/21599774-higher-inflation-may-be-needed-leave-extra-low-interest-rates-behind-up-up-and
What are they going to do to raise inflation? Will people still continue to be hired?
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