Williams, John

Mr. Williams said that in a world where the natural rate of interest is low, the Fed has less room to lower short-term interest rates in response to economic downturns and “you’re going to hit the zero-lower or effective-lower bound more often, whatever that lower bound may be.” As a result, the central bank needs to consider possible alternative tools or other solutions, he said.

“You could think about keeping a permanently higher balance sheet” as a way to raise the natural interest rate, he said, which is “something we haven’t studied that much, but I think needs a lot more thought.” He added, “We need to think more about whether going to negative interest rates gives us more room.”