It could also trigger a disorderly unwinding of investment in certain securities, causing mis-pricing in other market segments. This problem could be more serious in a situation in which large parts of the financial system are already distressed.
I would also like to emphasise that even at zero rates the central bank can stimulate lending by entering directly into the credit market, making up for the absence of lenders and buying long-term assets. 18 This however implies that the central bank is willing to take the capital losses that are likely to emerge when interest rates are increased again.