Skip to content
Subscriber Only

Fed May Lack Legal Authority for Negative Rates: 2010 Memo

  • August 2010 memo highlights possible hurdles to negative rates
  • `Not at all clear' law allows Fed to charge negative rates
Video player cover image

Will the Fed Go Negative on Rates?

Updated on

The Federal Reserve may not have the legal authority to set negative interest rates in the U.S., according to a 2010 staff memo that was posted late last month on the central bank’s website.

The document, which is dated Aug. 5, 2010, and was publicly released on Jan. 29, suggests the law that authorized the Fed to pay interest on excess reserves, or IOER, may not grant it the authority to charge interest. That could constrain the central bank’s ability to take interest rates below zero, though it might be able to find a work-around.