Federal Reserve Chairman Jerome Powell said Wednesday that the central bank is opposed to setting negative interest rates.
“This is not something that we are looking at,” he said during an interview with the Peterson Institute. “We chose not to implement negative rates during a global financial crisis and recovery.”
Powell’s position contrasts with that of President Trump, who on Tuesday urged the Federal Reserve to adopt negative interest rates.
“As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the ‘GIFT’. Big numbers!” Trump tweeted.
Powell said that all members of the Federal Open Market Committee oppose using negative rates.
“That is not a sentence you get to say very often — all FOMC participants see negative rates currently do not appear as an attractive monetary policy,” Powell said, adding that the “evidence on negative rates is very mixed. … There is research that says they’ve been effective. There are plenty of doubters.”
The Federal Reserve cut its interest rate target on March 15 to between 0% and 0.25% in an emergency response to the pandemic.
Powell expects the central bank to continue to use its current “tool kit” that includes the purchasing of Treasuries and mortgage-backed securities and providing liquidity and funding measures to banks, businesses, and households. Powell said these efforts by the Fed will continue until the nation has been able to contain the spread of the coronavirus.
“At the Fed, we will continue to use our tools to their fullest until the crisis has passed and the economic recovery is well underway,” Powell said.
