Fed Chair Jerome H. Powell said the central bank is not considering lowering interest rates below zero, saying that negative rates are not necessary given the Fed’s other tools.
“For now it’s not something that we are considering,” Mr. Powell said during a question-and-answer session after giving a speech at the Peterson Institute for International Economics.
Mr. Powell said the Fed would instead rely on the same tools it employed during the last recession — forward guidance about the path of interest rates and asset purchases.
“We have evidence that it works and that’s what we will be using,” Mr. Powell said, adding that the evidence about whether negative rates are effective is “very mixed,”
The Fed has already slashed rates to near zero and indicated that it will not raise them anytime soon. But investors have been speculating about negative rates over the past week after futures contracts began to imply that the Fed’s main policy rate will dip below zero around the end of 2020. Central bank officials have consistently pushed back on that idea.
Still, some vocal champions of negative rates have continued to call on the Fed to embrace them, including President Trump, who has repeatedly urged Mr. Powell to take rates below zero.
“As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the “GIFT.” Big numbers!” Mr. Trump said in a tweet on Tuesday.