The Death of the Zero Lower Bound: Negative Nominal Interest Rates
It is believed that Mario Draghi will cut the ECB’s deposit rate even lower, and will increase the Eurozone’s Quantitative Easing programme, in order to increase aggregate demand in the Eurozone. Meanwhile, the Fed is set to increase interest rates. It seems that the two largest economies are pursuing diverging policies. However, of particular interest is that Draghi seems to have broken the zero lower bound ‘rule’.
