Economists have argued energetically over negative rates since the global financial crisis
be forgiven for supposing that the Federal Reserve has already thrown everything—kitchen fixtures included—at the covid-19 downturn. In recent months the Fed has slashed its benchmark interest rate to near zero, bought nearly $3trn in assets and launched a bevy of lending programmes. But America’s central bank appears conservative in one respect.
The dire state of the world economy has economists asking whether more can be done. Central bankers weighing further rate cuts face three important questions. The first concerns the technical feasibility of more deeply negative rates. If Europe and Japan are a guide, rates in America and Britain could at least go modestly negative. Some economists, such as Kenneth Rogoff of Harvard University, suggest that with regulatory tweaks the effective lower bound on rates could be pushed much lower.
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