Federal Reserve is in a odd position after increasing the interest rate last December for the first time in nearly a decade. The Central Bank dithered several times and postponed its decision of an interest rate hike. Now, Chairwoman, Janet Yellen, is trying to find some reasons to continue to increase interest rates over the next few months while the global economy is still suffering in the backdrop and may prevent that from happening at the pace she would have liked.
Negative Interest Rates
After the Bank of Japan adopted the negative interest rate policy, there appears to be some clamor for it in the developed nations. The Fed Chairwoman told the lawmakers that the negative interest rate would not provide any safety for the US economy. While some of the European nations also favored it, circumstances are cleary different in the Eurozone. The ECB Chairman wanted to ease the monetary policy as long as the market needed it.
During the week, Yellen told the lawmakers that the Fed was evaluating a contingincy in the event of contunued losses from the US markets and slower than expected economic growth. Some of the economists or analysts have already said that these factors would drive the world into a recession. Also, the possibilities of another financial crisis could not be ruled out due to increasing bad debts.