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ZIRP (Zero Interest-Rate Policy)

The zero interest-rate policy (ZIRP) is a monetary policy maintaining nominal short-term interest rates at zero. The global financial crisis that began in 2007 prompted the major central banks to take unconventional policy measures (although the ZIRP was first used by Japan in the 1990s). One of them was the reduction of short-term interest rates to about zero. The Fed slashed the federal funds rate to about zero in December 2008 and maintained it at such level until December 2015 (see the chart below). However, that hike was modest, so it did not normalize the level of interest rates.

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