Zero interest rate

Updated: Aug 20, 2021

The monetary policy of maintaining a nominal interest rate of zero per cent. Once a zero interest rate has been achieved it is not possible to stimulate the economy by reducing the interest rate any further. This means that other forms of monetary policy, such as quantitative easing, have to be used. However, in exceptional circumstances a monetary policy authority can push key short-term interest rates below zero. See also negative interest rate.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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