FT: US and UK rates are negative in real terms – by at least 3% and 1.5% respectively – while eurozone rates are still positive by a whisker. So is the global economy headed towards zero interest rates? The answer is that, in real terms, it has already arrived.
CIBC: Cut the funds rate to zero, and there's nothing left to do. Not so. Central banks could move out the curve, buying longer-dated securities and forcing their rates down to zero. They could lend money in higher volumes directly to economic participants, as the Fed is doing in the commercial paper market.
Mishkin (via Thoma): One common view is that when a central bank has driven down short-term nominal interest rates to near zero, there is nothing more that monetary policy can do to stimulate the economy. That view is false. Expansionary monetary policy to increase liquidity in the economy can be conducted with open market purchases, which do not have to be solely in short-term government securities.
Goldman Sachs (not online): With riskless short-term interest rates now close to zero, conventional monetary policy is becoming ineffective. What are the alternatives? Three options with a relatively high likelihood of near-term implementation by the Fed: 1) a large-scale fiscal stimulus program, 2) more proactive use of Fannie Mae and Freddie Mac for purchasing and securitizing mortgages, and 3) a precommitment by Fed officials to keep the federal funds rate low for a "considerable period"If these policies fail to result in an economic pickup, Fed officials might (4) purchase long-term Treasury and Agency securities. The Treasury might (5) decide to purchase risky assets outright, and this could again perhaps be financed by Fed money creation.
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