The Pitfalls of the Federal Reserve's Zero Interest Rate Policy

The Federal Reserve has kept its target range for the federal funds rate at 0 to 0.25 percent since December 2008. This is often referred to as the Fed's "zero interest rate policy," or ZIRP. The purpose of near-zero overnight rates – and forward guidance to convince markets that those rates will be maintained – has been to affect the entire rate structure: keeping all rates lower than they would have been in a free capital market.