Fed study puts ideal US interest rate at -5%

[Pale Blue Dot]

Source: Financial Times

The ideal interest rate for the US economy in current conditions would be minus 5 per cent, according to internal analysis prepared for the Federal Reserve’s last policy meeting.

The analysis was based on a so-called Taylor-rule approach that estimates an appropriate interest rate based on unemployment and inflation.

A central bank cannot cut interest rates below zero. However, the staff research suggests the Fed should maintain unconventional policies that provide stimulus roughly equivalent to an interest rate of minus 5 per cent.

Fed staff separately estimated what size and type of unconventional operations, including asset purchases, might provide this level of stimulus. They suggested that the Fed should expand its asset purchases by even more than the $1,150bn (€885bn, £788bn) increase policymakers authorised at the last meeting, which included $300bn of Treasury purchases.

The assessment that the US central bank needs to provide stimulus equivalent to a substantially negative interest rate is unlikely to have changed ahead of this week’s policy meeting.

Read more: http://www.ft.com/cms/s/0/37877644-32c9-11de-8116-00144feabdc0.html

[msongs]

1. banks are screwing people who save - where is competition for more customers via higher rates? nt

[high density]

2. Well yeah, that would be great for the banks

They get money at -5%. We then pay 10+% for that money. As if 0% money isn't cheap enough for them.

[izquierdista]

3. I'm ready to do my part

Any billionaires needing to invest their money, you can open an account with me at -5%. However, there will be a substantial penalty for early withdrawal. :evilgrin:

[bemildred]

6. Me, me, me too. I want to "borrow" money.

Have we finally gone down the rabbit hole?

[DJ13]

4. So whats their excuse for turning a blind eye on 29% CC rates?

[caseymoz]

5. My guess? Their lobbyist are tough and mean. nt

:sarcasm:

[No Elephants]

7. So, people who got rid of their debt and saved their money are screwn, right along with those

who borrowed and invested in risky things. Can't win for losing--unless you're Haliburton, Goldman Sachs, etc.

I'm sick of this folks, and I don't think just voting Democrat is the answer anymore. What's the real answer? Public campaign financing? Breeding better Democrats? What? Just tell me and I'll work my little broken heart out for it.