Federal Reserve Chair Janet Yellen said the Fed is currently re-examining the implementation of negative interest rates as a way to offset a dragging US economy. This is real, folks, and would completely turn upside down the way loans and bank accounts work. If the Feds implemented say, a -1% interest rate and you keep a balance of $20,000 in a savings account, you’d lose $200 a year. According to Bloomberg.com, Yellen is turning to European models as the framework for her inspiration.
“We had previously considered them and decided that they would not work well to foster accommodation back in 2010,” Yellen said Thursday, answering questions during a second day of testimony before Congress. “In light of the experience of European countries and others that have gone to negative rates, we’re taking a look at them again because we would want to be prepared in the event that we needed to add accommodation.”
The Federal Reserve is the most powerful entity in the world. Their consistent show of greed and illusiveness is a constant reminder that the world economy is always a mere day away from a complete crash. Yellen claims ignorance of any potential legal challenges which could arise if the Fed were to make this drastic change, but not every expert agrees. Some feel strongly that a legal case could be made against the Fed regarding this and this may be why the Fed is acting in a deliberately slow and gentle manner. In other words, they are treading lightly.
“I am not aware of any legal restriction that would mean that we could not establish negative rates, but I will say that we have not looked carefully at the legal side of this,” Yellen said Thursday
The European Central Bank and the Bank of Japan have both cut rates below 0%.