Despite a slightly more dovish tone in economic outlook, Federal Reserve Chair Janet Yellen said that the FOMC is not considering implementing negative interest rates.
In her press conference following the Fed’s latest announcement — at which it kept interest rates at 0.25%-0.50% — Yellen shut down any idea that the Fed was investigated negative rates.
Yellen reiterated that the economy was on a path of slow and steady growth and in the Fed’s view there is likely to be no need for this unprecedented measure to be put in place in the future.
“So what I would like to make clear is that this is not actively a subject that we are considering or discussing,” Yellen said Wednesday.
“The Committee continues to feel that we are on a course where the economy is improving and inflation continues to move up… We are not spending time discussing things we could do for additional accommodation and certainly not actively considering negative rates.”
Negative interest rates have been implemented by both the Bank of Japan and European Central Bank, and the effect of negative rates on the economy and consumers has become a hot topic of debate in economics circles.
And certainly, the Fed is watching. “We are looking at the experience in other countries and I guess I would judge, they seem to have mixed effects, some positive and some negative things,” said Yellen.
Additionally, Yellen said that there are a number of other tried-and-true measures the Fed could lean on in the event the economy shifted downward and more easing was needed.
Here’s Yellen (emphasis added):
“But look, if we found ourselves in the unlikely situation where we needed to add accommodation we have a range of tools. We know from the things we did in the past that we have a number of options with respect to the maturity, for example, of our portfolio, with respect to asset purchases, or forward guidance that remain available to us. There are tools we could turn to in the unlikely event that we need to add accommodation, but negative rates are not something we are actively considering.”
This was the press conference’s final question.
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