But as the financial crisis intensified and the economic outlook grew more dire in the fall of 2008, the Fed continued to cut rates. For more than three years now, our policies have held short-term interest rates close to zero.
Just as the Federal Reserve used traditional concepts in unconventional ways to provide liquidity to the shadow banking system and stop the panic, once our main short-term interest rate lever was effectively at zero, we moved beyond traditional monetary policy to purchase longer-term assets and push down longer-term interest rates.