Holding Bank Rate at 0.5 per cent indefinitely will damage investment, not stimulate it

Does cutting the Bank Rate (the Bank of England policy rate) cut the real-terms cost of capital for investors? Most discussions take it for granted that it does do this. But since changes to the Bank of England policy rate are unlikely to have much effect upon natural human impatience or the risk-return trade-off, it seems that theory implies that changes to Bank Rate don’t affect the cost of capital.

Read the full blog post here

Source: http://www.iea.org.uk/blog/holding-bank-rate-at-05-cent-indefinitely-will-damage-investment-not-stimulate-it

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