Need help on a power point presentation on Negative interest rates? Fed Reserve

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Need help on a power point presentation on Negative interest rates?
Fed Reserve Chair Janet Yellen is considering a negative federal funds rate policy to raise inflation to target levels. She’s tasked you with investigation the efficacy of this until recently mostly theoretically principle. Research your findings along with determination of what you believe will occur to the federal reserve board of governors Need help on a power point presentation on Negative interest rates?
Fed Reserve Chair Janet Yellen is considering a negative federal funds rate policy to raise inflation to target levels. She’s tasked you with investigation the efficacy of this until recently mostly theoretically principle. Research your findings along with determination of what you believe will occur to the federal reserve board of governors
Fed Reserve Chair Janet Yellen is considering a negative federal funds rate policy to raise inflation to target levels. She’s tasked you with investigation the efficacy of this until recently mostly theoretically principle. Research your findings along with determination of what you believe will occur to the federal reserve board of governors

Explanation / Answer

Negative Interest rates would mean that instead of getting returns on the deposits made, individuals would have to pay to park their funds in the bank. Fed Reserve Chair's move to introduce a negative federal funds rate would stimulate growth and lead to raised inflation rates. As the money flow in the system increases because of negative funds rate, the money supply increases leading to increasing inflation. Such practices have been introduced in Sweden on the interest rates at which central bank lends money to the banks and the objective was to raise inflation which is also below zero. Bank of Japan and Switzerland have also followed similar policies.

1. Negative interest rates also pushes up the value of the currency because of the investors' reluctance to invest in the home currency.

2. In an environment with high inflation and low interest rates, it becomes relatively more expensive to save and relatively less expensive to consume and hence the policy of negative interest rates could boost growth and employment in an economy as it is an expansionary monetary policy.

3. Federal funds rate is the rate at which banks borrow or lend money from other banks. Borrowing funds at negative interest rates can allow banks to pass lower cost of debt on to consumers.

4. In a negative interest rate environment, businesses are more likely to undertake capital investments such as expansion of facilities or machinery, both of which stimulate employment. The lower cost of debt to businesses also encourages expansion in times of weak aggregate demand.

negative federal funds rate policy would create an environment in the economy where lending or consuming would seem more profitable than saving which is required in the US economy to meet the global trend of easing monetary policies

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