The bump in the road

The US economy is picking and things look to be slowly getting back to normal, says John Stepek. There's just one catch – and it's a big one.

We often think of today's monetary policy backdrop of 0% interest rates as being unprecedented. Here in the UK, for example, short-term rates the Bank of England rate basically haven't been this low since at least 1694, and perhaps even further back than that. However, while there are no precise parallels for what we're living through, a dig around shows it's not quite as unique as we might think.

The other day, I pulled out an old Federal Reserve research paper from November 2000: Monetary policy when the nominal short-term interest rate is zero. One of the many charts in this rather dry read notes that US short-term rates fell to near-0% after the Great Depression, and occasionally even dipped into negative territory between 1938 and 1941.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.