The Federal Reserve has not done the legal analysis to determine if it has the authority to implement negative interest rates if it wanted to do so, Fed Chairwoman Janet Yellen testified Wednesday.
“I am not aware of anything that would prevent us from doing it, but I’m saying that we have not fully investigated” the legal basis for doing so, she told the House Financial Services Committee.
The Fed considered the option of negative rates in 2010, Yellen testified, but decided not to pursue them. As a result, it didn’t perform a thorough legal analysis, and whether it could legally set negative rates “remains a question that we would need to investigate,” she said.
Other central banks have set short-term rates below zero in recent years. Last year, one member of the Fed’s monetary policy committee suggested that the Fed might need to push rates below zero.
