Zero bound

By | 2017-09-14T10:44:00+00:00 14th September 2017|

When a Central Bank such as the US Federal Reserve, the European Central Bank or the Bank of Japan has lowered short-term interest rates to zero or nearly zero, rates cannot be, conventionally, cut further. This is known as the ‘zero bound’. The ‘zero bound’ tends to prompt new methods of economic stimulus to be assessed and/or implemented.

The US Fed spent over 7 years with interest rates at the zero bound (end 2008 to end 2015) whilst the ECB and the Bank of Japan have core interest rates still at the zero bound.