With the Federal Reserve on pause with interest rates at the low level of 2.25% to 2.5%, Fed officials are starting to wonder: is the central bank ill-equipped to deal with the next crisis? And would negative interest rates be an effective tool?
When the financial crisis began in 2007, the Federal Reserve had a 5.25% target interest rate to work with. By the end of 2008, the Fed had lowered interest rates as much as it could lower them — to zero — and turned to large-scale asset purchases through quantitative easing in an attempt to further stimulate the economy.
