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Quantitative easing may cause higher inflation than desired if the amount of easing required is overestimated and too much money is created by the purchase of liquid assets. [108] On the other hand, QE can fail to spur demand if banks remain reluctant to lend money to businesses and households.
At the end of July 2008, the annual rate of inflation was at 4.4% (as measured by the CPI) or 3.6% (as measured by the HICP) [82] [83] and inflation actually dropped slightly from the previous month. In terms of GDP per capita, Ireland is ranked as one of the wealthiest countries in the OECD and the EU-27, at 4th in the OECD-28 rankings.
The Bank of England announced that due to the deepening recession in the UK, it would be extending its quantitative easing program to a new total of £175 billion. [101] In November 2009, The Bank of England announced it would be adding a further £25 billion in continuation of quantitative easing in assisting the UK economy through the recession.
The fall in the Consumer Prices Index to 10.7% last month is hoped to mark the start of a downward trend.
Former Fed Chairman Paul Volcker warns that more quantitative easing by the Federal Reserve will stoke inflation. "When money is too easy for too long, we will have more" asset bubbles, the 83 ...
In this scenario, a rise in expected inflation results in only a smaller rise in the nominal interest rate and thus a decline in the real interest rate . It has also been contended that the Fisher hypothesis may break down in times of both quantitative easing and financial sector recapitalisation.
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The quantity theory of money (often abbreviated QTM) is a hypothesis within monetary economics which states that the general price level of goods and services is directly proportional to the amount of money in circulation (i.e., the money supply), and that the causality runs from money to prices.