Actually low interest rates are one of the primary causes of monetary inflation due to how fractional reserve banking works.
The TLDR is this. I borrow a million dollars, and give it to you for a house. You deposit it, and your bank loans 97% of it to someone else. They deposit that, and loan 97% of that out again... ad infinitum.
> I borrow a million dollars, and give it to you for a house. You deposit it, and your bank loans 97% of it to someone else. They deposit that, and loan 97% of that out again... ad infinitum.
This is how it's taught in school. The more-accurate version is that "whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money" [1].
Interest rates make borrowing cheaper. That spurs demand for loans which lets banks create deposits. To have the capacity to make those loans, the banks need sufficient reserve margin to meet the reserve requirement. This is usually a non-issue. They also need enough risk-adjusted capital. This is usually the issue. But if a bank needs more of this, and interest rates are low, it can buy the reserves through borrowing or equity issuance. Lower interest rates make both cheaper.
The TLDR is this. I borrow a million dollars, and give it to you for a house. You deposit it, and your bank loans 97% of it to someone else. They deposit that, and loan 97% of that out again... ad infinitum.
Commonly this is called the "money multiplier."