Most empirical studies have found no significant impact of the interest rate on inflation.
Hung and Pfau (2008) study the role of the real (lending) interest rate and conclude that it
had no statistically significant effect on either output growth or CPI inflation over the period
1996–2005. This is consistent with the empirical results reported by Nguyen and Nguyen
(2010), who find that the effect of a change in the interest rate is almost immediate but very
weak, and soon becomes insignificant. Camen (2006) reports that the interest rate (lending
rate) explains less than 5 percent of the forecast variance of CPI inflation over the period
1997–2005.