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The Zero Lower Bound Remains a Medium‑Term Risk

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Abstract

Interest rates have fluctuated significantly over time. After a period of high inflation in the late 1970s and early 1980s, interest rates entered a decline that lasted for nearly four decades. The federal funds rate—the primary tool for monetary policy in the United States—followed this trend, while also varying with cycles of economic recessions and expansions.

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  • Sophia Cho & Thomas M. Mertens & John C. Williams, 2025. "The Zero Lower Bound Remains a Medium‑Term Risk," Liberty Street Economics 20250707, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:101205
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    1. Thomas M. Mertens & John C. Williams, 2021. "What to Expect from the Lower Bound on Interest Rates: Evidence from Derivatives Prices," American Economic Review, American Economic Association, vol. 111(8), pages 2473-2505, August.
    2. Michael D. Bauer & Thomas M. Mertens, 2019. "Zero Lower Bound Risk according to Option Prices," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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