Federal Reserve Chair Powell Addresses Effective Lower Bound Concerns

According to Odaily, Federal Reserve Chair Jerome Powell has stated that the effective lower bound (ELB) on interest rates remains a significant issue, though returning to this lower bound is no longer the baseline scenario. The ELB refers to the minimum interest rate level that central banks can set, typically zero, also known as the zero lower bound. In the aftermath of the global financial crisis, several central banks, including Japan, have experimented with negative interest rates, challenging this concept. Since the crisis, central banks have faced declining neutral interest rates and inflation expectations, bringing actual rates closer to the ELB. If the economy experiences a downturn or recession, the frequency of rates reaching the ELB could increase.