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Tuesday, March 01, 2016

'How Low Can They Go?'

Cecchetti & Schoenholtz:

How Low Can They Go?: Not long ago, nearly everyone thought that nominal interest rates could not go below zero. Now, we have negative policy rates in the euro area and Japan, while in Sweden and Switzerland, the lowest controlled rate is below -1%. And government securities worth trillions of dollars bear negative rates, too. ...

Skipping past the detailed explanation:

... The bottom line: international experience suggests that negative interest rates, at least as low as we are seeing today and (in some places) significantly lower, will become a permanent part of the monetary policy toolkit. If that’s right, we need not worry quite so much whether a 2% inflation target is too low.

    Posted by on Tuesday, March 1, 2016 at 08:20 AM in Economics, Inflation, Monetary Policy | Permalink  Comments (12)


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