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Former Fed Chair Alan Greenspan against using NIRP

'We're in trouble'

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Former Federal Reserve Chair Alan Greenspan said he is against using negative interest rates as a tool for the U.S. central bank, weighing in on a recent controversial debate, an article in MarketWatch reported.

From the MarketWatch article by Greg Robb:

Greenspan said in an interview on Bloomberg Television that negative rates would lead to “misuse of capital.”

Asked if the economy was in trouble, Greenspan replied: “Yup.”

“We’re in trouble basically because productivity is basically dead in the water,” he added.

Greenspan said “there are so many huge unknowns” in the global economic outlook at the moment.

The idea of negative interest rates is making its way around Washington D.C.

However, the move would reverse the projected course of the Federal Reserve.

It was a little more than two months ago that the Fed announced it was officially raising the federal funds rate for the first time since June 2006.

Fed Chair Janet Yellen was recently asked about the possibility of a Negative Interest Rate Policy as a different option to the Zero Interest Rate Policy from the last several years we've all come to know.

Yellen’s hearing before the House Financial Services Committee in February focused heavily on the feasibility of NIRP.

When asked about a Negative Interest Rate Policy in the semi-annual monetary policy hearing, Yellen said that is something that should first be examined by the Federal Reserve.

Source: MarketWatch
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