Why the Federal Reserve is rethinking everything,


The Federal Reserve is being forced to reevaluate its most basic assumptions about the economy after trillions of dollars of stimulus and years of ultralow interest rates have failed to generate a more robust recovery.

“I think all of us are involved in a process of constantly re-evaluating where is that neutral rate going,” Yellen told reporters last month. 

“Maybe more of what’s causing this neutral rate to be low are factors that are not going to be rapidly disappearing but will be part of the new normal.”

Among the most prominent theories is one championed by former Treasury secretary and Harvard economist Lawrence H. Summers, which argues that deeper forces are discouraging business investment and miring the economy in an era of so-called "secular stagnation."


Ylan Q. Mui, Washington Post 27 July 2016





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