A Perspective on Nominal Interest Rates

Abstract

Interest rates are at historic lows. The U.S. effective federal funds rate was near zero between late 2008 and late 2015 and has remained low since “liftoff” in December 2015.1 Other developed countries, such as Germany, Japan, and Switzerland, have recently sold new long-term debt at negative yields. This essay revisits some facts about interest rate behavior to provide context for the current situation.