4 ms·
It used to be, until they reached 0%. The usual metaphor is that the interest rate is how hard you pull a rope. Pulling harder slows down the economy more. Bu
by BurningFrog 5y ago
It used to be, until they reached 0%.
The usual metaphor is that the interest rate is how hard you pull a rope. Pulling harder slows down the economy more.
But below 0%, you're trying to push the rope. And, as any rope expert will tell, you that doesn't do anything.
- wolpoli 5y agoIt's important to note that the Federal reserve normally controls the overnight rate, and let the market determines the interest rate for other durations (eg. 30Y). That changed with the introduction of Quantitative Easing where it reduces the interest rate over the entire yield curve. In other words, even through the overnight rate is 0%, you could still push down the interest rate down for bonds of a longer maturity, and that'll further stimulate the economy.