FT/Sam Fleming/03-23-17
Even as US rate-setters make tentative progress in the direction of more normal monetary policy, economists are warning that central banks are set to find themselves with official interest rates stuck back down at near-zero levels dispiritingly often in the future.
A study to be presented at the Brookings Papers conference this week by two Federal Reserve Board economists finds that rates could hit zero as much as 40 per cent of the time – far more often than predicted by other studies.
PG View: This could explain why the Fed is raising rates into economic weakness, just so they have some room above the zero-bound and don’t have to go negative.
