Actionable news
0
All posts from Actionable news
Actionable news in TLT: ISHARES 20+ YEAR TREASURY BOND ETF,

Why the Fed might need to cut rates to minus 2 percent: Former Fed economist

The U.S. Federal Reserve might need to cut interest rates to as low as negative 2 percent, far lower than levels other global central banks have tested, a former Fed economist said.

That's what would likely be needed to engineer a recovery if the U.S. economy were to fall into a recession in the next couple of years, Marvin Goodfriend, who was an economist and policy advisor at the Federal Reserve's Bank of Richmond from 1993-2005, told CNBC's "Squawk Box" on Thursday.

Goodfriend, who is currently a professor of economics at Carnegie Mellon University, pointed to data on the eight recessions in the U.S. since 1960.

"In eight of those recessions, the Fed had to push the short rate 2.5 percentage points below the long term rate. Today, the 10-year rate in the U.S. is 1.5 percent," he noted, saying that would indicate that during the next recession, the Fed would need to cut rates as low as minus 1 percent at a minimum.

"In five of those recessions, the Fed had to push the federal funds rate 3.5 percentage points below the 10-year bond rate," he said. "So if that happens this time around, we would have to push the federal funds rate to minus 2...


More