by Willem Van Zandweghe and John Carter Braxton – FEDERAL RESERVE BANK OF KANSAS CITY
Despite an unprecedented degree of monetary policy accommodation, including record-low interest rates, the pace of the current economic recovery has been only moderate. This moderate pace was unexpected by many forecasters and prompted extensive research into the roles of credit frictions, uncertainty, and other factors. One way these factors may have weakened the recovery is by reducing the stimulative effect that a decline in interest rates usually has on spending by consumers and businesses.
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