Central bank interest rates and inflation

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How can BOJ have a negative interest rate and only 3.2% inflation (Aug YoY down .1%), while NA has 5+% rates in an effort to control inflation yet Canada’s inflation rate for the same period is over 4% up from 3.3% previous?

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Asked on September 26, 2023 8:48 am
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Japan has historically had this rate since about 2016. They did it in an effort to spur the economy. It's not something that has generally worked, at all, and I wouldn't look to them much in terms of the right way to do things, so to speak.

Many countries have tried negative rates to stimulate growth and pretty much all of them have failed.

High inflation is typically a sign of a hot economy. If you're economy isn't growing or thriving (Japan's hasn't moved for 25+ years) it doesn't matter where interest rates are at, you'll have relatively reasonable inflation. Whereas in North America, where the economy got red hot during COVID, high policy rates were needed to slow down spending.

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Posted by Dan Kent
Answered on September 27, 2023 9:04 pm