Monetary easing breaks liquidity trap, boosts economy during low interest rates.
The liquidity trap, where monetary policy is thought to be ineffective, may not be as limiting as previously believed. By using different tools like QE and credit easing, central banks can still boost the economy even when interest rates are low. Recent research shows that easing monetary policy can increase output and inflation, even when rates are near their lowest point. This has been seen in the US, the euro area, and Japan.