Central banks are not forced to adopt ZIRP, or NIRP (negative interest rate policy). ZIRP and NIRP are choices. And, after 20 years of Japanese experience with ZIRP, and/or familiarity with standard monetary models, we should not be surprised when ZIRP produces low inflation. We should also not be surprised that NIRP produces even lower inflation. Further, experience with QE should make us question whether large scale asset purchases, given ZIRP or NIRP, will produce higher inflation. The world's central bankers may eventually try all other possible options and be left with only two: (i) Embrace ZIRP, but recognize that this means a decrease in the inflation target - zero might be about right; (ii) Come to terms with the possibility that the Phillips curve will never re-assert itself, and there is no way to achieve a 2% inflation target other than having a nominal interest rate target well above zero, on average. To get there from here may require "tightening" in the face of low inflation.
So, given what we see, here are some possibilities:
1) Williamson and the Neo-Fisherites are right. It might hurt temporarily, but short term rates need to be raised if we want inflation to be higher in the long term.
2) Sumner, Svensson, Rowe, Friedman, etc are right. Inflation is purely monetary, and we aren't seeing it because we actually aren't doing nearly enough to budge the expectations on NGDP. Rates need to be kept 'low' (in fact, this crowd argues they're still 'high'). Moreover, if we want to do unconventional policies we need to not pay interest on reserves.
3) Neither group is right. Conventional monetary policy actually has no causal deterministic effect on inflation over some sufficient time horizon. Exogenous factors combined with psychological factors/expectations drive everything.
Addendum: Alan Derk adds the following
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