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, reports the Financial Times.
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.
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