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Economic Commentary

A Monetary Policy Paradox

One of the most difficult tasks faced by any central bank is explaining to the public the role that interest rates play in the conduct of monetary policy. The common understanding is that the Federal Reserve fights inflation by acting to raise short-term interest rates. But as pointed out by economist Irving Fisher many years ago, reduced inflation is associated with lower, not higher, rates of interest.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This paper and its data are subject to revision; please visit for updates.

Suggested Citation

Carlstrom, Charles T. 1995. “A Monetary Policy Paradox.” Federal Reserve Bank of Cleveland, Economic Commentary 8/15/1995.

This work by Federal Reserve Bank of Cleveland is licensed under Creative Commons Attribution-NonCommercial 4.0 International