Ageing populations spur rate volatility
A larger change in policy rate may be needed to make impact on the real economy
Not unlike the ageing public, central banks will have to work harder as their economies grey and greater volatility in interest rates over time may well be the outcome.
Monetary policymakers around the globe are already preparing households and businesses for the likely end of the present super-low interest rate era over the years ahead.
Yet despite five years of crisis management in which central banks were the dominant and most powerful forces, some economists reckon they have been steadily losing their influence on the real economy in recent decades.
The success of inflation targeting in managing long-term expectations has in itself lessened the reverberations of interest rate moves, as did developments in housing finance and extensive credit deregulation.
But one reason cited for central banks losing that traction is rapid ageing populations.
Traditional changes of 25 basis points may have to be amplified
On the basic "life-cycle" assumption that younger people incur more debt and older folk have higher savings and assets as they hit retirement, the argument centres on the idea that debtors rather than creditors are far more sensitive to interest rates.