Monetary policy is losing its power over households

The downward trend in interest rates that began in the 1980s contributed to large falls in household saving rates in most advanced economies. But with larger proportions of people now nearing retirement, some consumers are being forced to respond to low interest returns by saving more. While it is still unlikely that low interest rates are the reason why household saving rates have recently risen, population ageing has arguably weakened the ability of monetary policy to affect saving and therefore consumption.