What if the theory of “neo-Fisherism” is right?

“Neo-Fisherism” raises the important question of how the Fisher relation below is satisfied in the medium term: Nominal interest rate = Expected inflation + Real interest rate In the medium term, expected inflation is equal to inflation, and the real interest rate normally depends on structural features of the economy (technological progress, long-term growth) and not monetary policy. According to neo-Fisherism, this implies that in the medium term, inflation is determined by the level of the nominal interest rate set by the central bank. Countries whose central bank persists with keeping nominal interest rates very low (the euro zone, Japan) are then stuck with very low inflation. For th is neo-Fisherian theory to be false: Inflation must have another determinant, such as the functioning of the labour market; the facts show that the money supply does not determine inflation in the long term; And t he central bank must be forced to set the nominal interest rate at the level that satisfies the Fisher relation, which means there is no longer any active monetary policy.