Policy Documents

The Pain of Zero Interest Rates

John H. Makin –
February 15, 2012

The current economic environment of low—virtually zero—interest rates has hit savers hard, but the US Federal Reserve’s accommodative monetary policy is actually having a stabilizing effect on the economy. Abruptly raising interest rates could harm economic growth and the housing market. Until the economy stabilizes enough that the Fed can start to slowly raise interest rates, savers have several less-than-ideal options, including adjusting their lifestyles; dipping into their savings; and taking on riskier investments, such as gold and stocks.