NY Fed report: Return to zero rates a ‘significant’ risk

The Federal Reserve’s policy rate is a long way from its lowest point, but markets remain concerned about a return to zero interest rates, according to findings from the Federal Reserve Banks of New York and San Francisco.

In an economic letter released Monday, reserve bank officials found that even though interest rate expectations are high on a historic basis, elevated uncertainty about the economic outlook has raised the stakes for a potential return to the zero interest rates.

 “Compared with the past decade, current data show that expected levels of future interest rates are high,” the letter notes. “Nevertheless, [zero lower bound] risk remains significant over the medium to long term, similar to levels observed…