Q&A: Debating Zero Rates

As the global economy grapples with the fallout from the coronavirus, markets are weighing the efficacy of emergency Fed liquidity and expectations that the central bank will use its full range of tools.

Equities across the world have tumbled from record highs in mid-February into bear market territory in less than a month, as fears have intensified over the likely economic impact of the coronavirus outbreak. 

In response, central banks around the world have instituted extreme stimulus measures to arrest the slide and restore investor confidence. Now markets are weighing the impact of emergency actions by the Federal Reserve, which set rates in a target range of zero to 0.25%, and other tools to help support the flow of credit to households and businesses.