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More rate cuts won’t save the economy – in fact they’re making it worse

Extremely low rates may lead to slower growth by increasing market concentration and thus weakening firms' incentive to boost productivity

Mario Draghi, president of the European Central Bank, announced further rate cuts and stimulus measures on September 12
Mario Draghi, president of the European Central Bank, announced further rate cuts and stimulus measures on September 12 Photo: Getty Images

The real (inflation-adjusted) yield on ten-year US treasuries is currently zero, and has been extremely low for most of the past eight years. Outside of the United States, meanwhile, 40% of investment-grade bonds have negative nominal yields.

And most recently, the European Central Bank further reduced its deposit rate to -0.5% as part of a new package of economic stimulus measures for the eurozone.

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