Fed Would Be Foolish to Take Rates Below Zero
The policy has had middling results at best elsewhere and could alarm the already vulnerable American public.
Stay positive.
Photographer: Brendan Smialowski/AFP/Getty Images
It’s occasionally surreal to write about Federal Reserve policy alongside former Fed officials.
Narayana Kocherlakota, president of the Minneapolis Fed until 2015 and a fellow Bloomberg Opinion columnist, has been out in front of the Fed’s actions from the onset of this crisis. In a Feb. 24 column, he urged the Fed to immediately lower interest rates rather than wait until its March 18 decision, even though current central bankers like Fed Vice Chair Richard Clarida were still claiming it was “too soon” to know whether the coronavirus outbreak would materially change the economic outlook. Eight days later, the Fed delivered a dose of shock and awe with its first emergency rate cut since 2008. Then on the Sunday before its scheduled March meeting, the Fed dialed its benchmark rate all the way back to near-zero.