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Think 1% Is Low? He Could Go to Zero

Analysts predict Japan-style cuts in interest rates

By Jason Farago, Newser Staff

Posted Oct 30, 2008 9:45 AM CDT

(Newser) – Yesterday Ben Bernanke cut the federal funds rate to an ectomorphic 1%—but the Fed might not be done yet. More and more analysts are predicting that the central bank will have to cut rates all the way to zero if it wants to get the economy moving again. But don't get too excited, writes the New York Times: A 0% funds rate would apply only to interbank lending, and wouldn't mean free money for consumers.

In Japan, interest rates remained at zero for 5 years before the central bank cautiously upped them to the current 0.5%. Now economists think America faces a Japanese-style threat of both reduced lending and possible deflation. And if he does cut to zero, Bernanke could go further still; the Fed's next move would be purchasing securities and debt to drive rates down even more.

A pedestrian walks by an electric market board with an image of Federal Reserve Board Chairman Ben S. Bernanke in central Tokyo on Tuesday, October 21, 2008. (AP Photo/Katsumi Kasahara)

Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, Monday, Oct. 20, 2008, before the House Budget Committee. (AP Photo/Lawrence Jackson)

Federal Reserve Chairman Ben Bernanke speaks at the Economic Club of New York Wednesday, Oct. 15, 2008. Behind him is Maria Bartiromo, a financial news correspondent for CNBC. (AP Photo/Mark Lennihan)

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Think 1% Is Low? He Could Go to Zero

Analysts predict Japan-style cuts in interest rates

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Think 1% Is Low? He Could Go to Zero

Analysts predict Japan-style cuts in interest rates

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OTHER STORIES ON OUR RADAR

Ben Bernanke • Federal Reserve • interest rate • interest rate cut • monetary policy • financial crisis

MOST POPULAR STORIES

[ By Views ]

[ By Comments ]

More Newser Stories

Fed Cuts Rate to 0%-0.25%

Target is record low as Reserve battles recession

Record Low Rates Leave Investors Cold

Cut is likely tomorrow, but Wall Street wants more varied approach

Stocks Sink as Bernanke Hints at Rate Cut

After early optimistic surge, Dow falls 300 points

Fed Keeps Rates Low

But central bank sees hope amid slow recovery

'Formidable Headwinds' Hinder Recovery: Bernanke

Weak credit and labor markets mean recovery will be slow: Fed chair

About Us

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Newser By Users

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