Negative Interest Rates: A Free Market Phenomenon

by J.P. Koning
The American Institute for Economic Research

Last week, Federal Reserve Chair Jerome Powell poured cold water on negative interest rates. They are “not something we’re looking at,” he said.

Just a few hours before, and on the opposite side of the world, New Zealand’s central bank was warming up to them. Negative interest rates “will become an option in future” and discussions with New Zealand banks about “preparing for a negative OCR” are ongoing.

Which of these two contrasting views on negative interest rates is right?

I’m going to side with the Reserve Bank of New Zealand on this. I’ve been saying for a few years now that central banks like the Federal Reserve should have carte blanche to set negative interest rates.

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