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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.

Suggested Citation

  • 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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    File URL: https://libertystreeteconomics.newyorkfed.org/2025/07/the-zero-lower-bound-remains-a-medium-term-risk/
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    More about this item

    Keywords

    zero lower bound (ZLB); ZLB; risk; Financial derivatives;
    All these keywords.

    JEL classification:

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

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