First, to earn the aforementioned difference between interest paid and interest received. Third, to enjoy the appreciation in the value of bonds in an environment of guaranteed cuts in interest rates. The very sluggishness of the NB is a boon to speculators. The real economy does not benefit from such an application of monetary medicine. Banks do not lend more following rate cuts, because they are choking on bad debts.
Borrowers postpone borrowing in anticipation of further rate cuts.
Consumers do not spend because real interest rates are still outlandish. Consumer credit has dried up, the savings rate is going up and the economy is languishing in official recession. A currency bubble is the result. When it bursts, the whole economy will suffer. Witness the Asian Tigers - now reduced to paper tigers.