FED RATE-CUTTING CYCLES AND ZERO LOWER BOUND PERIODS: AN ANALYSIS OF 2007–2008, 2019–2020 AND 2024–2026
Abstract
Relevance. When the policy rate falls to a level close to zero, the conventional instruments of the central bank become limited [J. Wu, F. Xia 2016]. Therefore, the speed of rate-cutting cycles, the length of time spent at the zero lower bound and the dynamics of exit from it are important for assessing monetary policy. The Fed's start of a new cutting cycle in September 2024 has made this issue topical again.
Problem. Cutting cycles take place under different conditions — a financial crisis, an unexpected shock, or a period of gradual easing — and unless their parameters are compared with one another, the dependence of the pace of policy on circumstances remains hidden.
References
1. Wu J.C., Xia F.D. Measuring the macroeconomic impact of monetary policy at the zero lower bound // Journal of Money, Credit and Banking. – 2016. – Vol. 48, No. 2–3. – P. 253–291.
2. Taylor J.B. Discretion versus policy rules in practice // Carnegie-Rochester Conference Series on Public Policy. – 1993. – Vol. 39. – P. 195–214.
3. FRED. Federal Funds Effective Rate (FEDFUNDS). Board of Governors of the Federal Reserve System (US). URL: https://fred.stlouisfed.org/series/FEDFUNDS (accessed: 29.09.2026).
