Here is the mechanism that will fully elaborate brc's point.
Elderly consume more than they produce. The young produce more than they consume to save for retirement.
A lowering of interest temporarily induces additional borrowings which will be invested in capital in the short run. Inefficient companies that were going to go bankrupt and release their physical capital for more efficient use, will be kept alive, staving off job losses.
In the long run, low interest reduce elderly's income on their savings. Reducing elder's income reduces demand for the goods the young produce. Since the young cannot produce at a loss, they produce less and have less income to save with. The causes reduced savings, which in turn means reduced investment, and thus even less spending, less income, which means deflation. This deflation is further enhanced from the increased supply caused by the increased investment in capital when interest was first lowered. And if you keep lending to companies at near zero interest rate with money from nowhere, increasing inefficiency in capital means lower yields in stock markets general, also lowering income in the long run, and lower job growth.
The Fisher equation[1]: Nominal interest rate = Real interest rate + Inflation.
The initial thrust of lowering interest will boost the economy temporarily. Keep down nominal interest rate long enough, and the economists will get the deflation they so dread.
Now you know why the EU and the U.S. has trouble with lack of inflation "even though" interest rate is so low for the past so many years.
Elderly consume more than they produce. The young produce more than they consume to save for retirement.
A lowering of interest temporarily induces additional borrowings which will be invested in capital in the short run. Inefficient companies that were going to go bankrupt and release their physical capital for more efficient use, will be kept alive, staving off job losses.
In the long run, low interest reduce elderly's income on their savings. Reducing elder's income reduces demand for the goods the young produce. Since the young cannot produce at a loss, they produce less and have less income to save with. The causes reduced savings, which in turn means reduced investment, and thus even less spending, less income, which means deflation. This deflation is further enhanced from the increased supply caused by the increased investment in capital when interest was first lowered. And if you keep lending to companies at near zero interest rate with money from nowhere, increasing inefficiency in capital means lower yields in stock markets general, also lowering income in the long run, and lower job growth.
The Fisher equation[1]: Nominal interest rate = Real interest rate + Inflation.
The initial thrust of lowering interest will boost the economy temporarily. Keep down nominal interest rate long enough, and the economists will get the deflation they so dread.
Now you know why the EU and the U.S. has trouble with lack of inflation "even though" interest rate is so low for the past so many years.
[1] https://en.wikipedia.org/wiki/Fisher_equation