The choice

Between 2001 and 2003, the Federal Reserve Board cut interest rates from 6,5% to 1%. The US central bank thought that lower rates would ward off the threat of retail price deflation. That problem was indeed avoided, but low rates led to a monumental bout of asset price inflation. Now the Fed and its global peers face the threat of asset price deflation. Could the answer be a renewal of retail inflation? The path from low interest rates to high asset prices goes through the borrowing that low ra...