Why Central Banks Are Watching the Zero Lower Bound Again

Episode 93 of Monetary Policy Explained with Fexingo. Lucas and Luna drill into the zero lower bound on interest rates — a concept that seemed obsolete after 2015 but is suddenly relevant again as several advanced economies flirt with near-zero policy rates in mid-2026. They use the Bank of Japan's experience as the central case, showing how Japan spent nearly a decade at the ZLB before moving to yield curve control, and why the ECB and Federal Reserve are now studying that playbook. The episode walks through the mechanics of the ZLB (why rates can't go much below zero without breaking the banking system), the 'reversal rate' theory from Stanford's Markus Brunnermeier, and how the Fed's 2026 review of its monetary policy framework is quietly grappling with this constraint. Specific numbers: the Bank of Japan's policy rate has been at -0.1 percent since 2016; the ECB's deposit rate is currently at 0 percent; the fed funds rate is at 0.75 percent. Listeners come away understanding why central bankers suddenly sound worried about a problem they thought they'd solved. #ZeroLowerBound #CentralBanks #MonetaryPolicy #BankOfJapan #FederalReserve #ECB #InterestRates #NegativeRates #ReversalRate #MarkusBrunnermeier #YieldCurveControl #PolicyRate #Economics #FexingoBusiness #BusinessPodcast #MonetaryPolicyExplained #LucasAndLuna #Macroprudential Keep every episode free: buymeacoffee.com/fexingo