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That's a very good point. I suspect that our interest rate policy is being driven by a desire to inflate the prices of assets that are typically purchased using loans or other means of interest-based financing.

"Inflation" is allegedly low, but I believe prices have gotten substantially higher over the last few years for things like homes, new cars and college tuition.

If the interest rate on a 30-year mortgage is 8%, someone can get a $250,000 mortgage for about $1,835/month. When interest rates are at 4%, that same monthly payment will get you a mortgage of about $385,000 -- a difference of $135,000.

Guess what happens when interest rates decline, folks. A home that used to cost $400,000 now costs $535,000. Of course, this doesn't count as "inflation" because home prices aren't actually included in the Consumer Price Index (CPI) used to compute inflation in the U.S.

“I suspect that our interest rate policy is being driven by a desire to inflate the prices of assets that are typically purchased using loans or other means of interest-based financing. “

That is an effect. I am not sure all the fed policy makers see that or have that as a motive, other than when it is their policy/belief that “money is too tight”.

By “too tight” they actually mean locked up in not-liquid assets/accounts. But, doing so is what more Americans have intentionally been trying to do since the last bubble burst - hang on to more of what assets they already have as a hedge against another bubble bursting. Lower interest rates are the fed’s way of asking the public to loosen their purse strings more, but the fed has no way of directing where in the economy that loosening will happen most. Will the stock market rise to new levels, will people increase their personal consumer borrowing, will mortgage rates relax, will more equity be pulled from homes by refinancing and spent, will business find some additional capital demands worthy of financing, and myriad other possibilities, including all of the above. But generally, when the fed is careless, one area of those possibilities becomes more exaggerated than others and a new bubble develops. If that is what happens this time, it will take time to see where that bubble is - real estate?, stocks?, personal finance?, where? No one knows.