Friday, January 23, 2009
Can an interest rate of zero be too high?
Can an interest rate of zero be too high? Unfortunately, yes. A new analysis by Goldman Sachs concludes that the Federal Reserve's cut in the federal funds rate to a record low of zero to 0.25 percent on Dec. 16 isn't going to be nearly enough to get the economy going again. The report says the Fed would need to reduce the federal funds rate to negative 6 percent by the end of 2010 to supply the needed amount of monetary stimulus.