Negative interest rates are becoming the new normal

CENTRAL bankers have long talked about the problem of the "zero lower bound." That's the idea that interest rates can't be set below zero. It is an important concept because it would mean there is a limit on how much an economy can be stimulated using monetary policy.

The last few years have exposed a problem with this idea. It now looks as if the zero lower bound isn't a bound. And it isn't at zero.

That was made clear by a decision from the European Central Bank on Thursday. It cut its main target interest rate, already at negative 0.2 per cent, to negative 0.3 per cent, expanding its campaign to try to stimulate Europe's economy and get inflation to rise towards its just-below-2 per cent goal.