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Macro Focus: What if the FED decided to go NIRP?

The Federal Reserve has so far resisted the general compulsion to implement negative interest rates among the world’s major advanced central banks. Fed Chairman Jerome Powell has repeatedly insisted that the Fed is not considering a negative interest rates policy (NIRP). But what if there is a sudden policy turnaround? Beyond what it has already done, the Fed has quite a limited number of policy options it might consider to prop up the US economy and foster its recovery from the Great Virus Crisis. As prominent economists like Kenneth Rogoff convincingly argue, NIRP might be the most efficient option at the Fed’s disposal. A turnaround on this issue is far from granted, but were it to happen it would usher a new era with tremendous economic, financial and geopolitical consequences for the world.

 

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