Mitigating COVID-19 Effects with Conventional Monetary Policy

RePEc Short ID: pcr38
ORCID iD: 0000-0003-3359-1823

Curdia, Vasco

Journal Article

Mitigating COVID-19 Effects with Conventional Monetary Policy

Abstract: The Federal Reserve slashed the federal funds rate in response to the effects of the COVID-19 pandemic. The full impact of the pandemic on the economy is still uncertain and depends on many factors. Analysis suggests that allowing the federal funds rate to fall fast will help the economy cope with the aftermath of COVID-19. In particular, the limited policy space due to the effective lower bound of the federal funds rate before the pandemic reinforces rather than offsets the need for a rapid funds rate decline.

Keywords: effective lower bound; monetary policy; COVID-19; federal funds rates;