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Why interest rate cuts may crimp household income

It’s unusual that higher interest rates have directly boosted household incomes by raising the amount of interest households have received on their savings by more than the interest they have paid on their loans. This suggests that interest rates cuts will actually reduce household incomes. So if you’re worried about how low inflation will be over the next two years, like we are, then interest rates may need to be cut a lot to support inflation. 

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