Borio said the influence of globalization on inflation has implications for central-bank policy. In the current context, that would mean providing less stimulus to the economy than many central banks are now offering. Borio offered another argument for running tighter policies, citing BIS research that suggests central banks have a much larger influence on real, long-term interest rates than they like to admit. Rather than being determined by the balance between savings and investment, Mr. Borio said an examination of the record from 19 countries going back to the s suggests real interest rates have fallen over recent decades because central banks have kept their policy rates low.
Central banks say there is a "natural" rate of interest determined by the savings and investment balance that they simply try to follow.
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