August 2020

Issues regarding the Use of the Policy Rate Tool

Jeffrey Campbell, Thomas B. King, Anna Orlik, and Rebecca Zarutskie


We review two nonstandard uses of the policy rate tool, which provide additional stimulus when interest rates are close to or at the effective lower bound—forward guidance and negative interest rate policy. In particular, we survey the use of these tools since the start of the Great Recession, review evidence of their effectiveness, and discuss key considerations that confront monetary policymakers while using them.

Accessible materials (.zip)

Keywords: monetary policy, effective lower bound, forward guidance, central bank communication, negative interest rate policy.


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Last Update: August 27, 2020