Story perspectives

Interest Rate Volatility: 9% ZLB Risk Looms Ahead

7/8/2025

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Summary

Story summary

U.S. interest rates have seen significant fluctuations, declining for nearly 40 years post-1970s inflation.
The federal funds rate hit the zero lower bound during the Great Recession and the COVID-19 pandemic.
As of May 2025, the seven-year ZLB risk stands at approximately 9%, shaped by interest rate expectations and uncertainty.
Higher expected rates lower ZLB risk, while increased uncertainty raises it, reflecting 2018 levels despite current higher rates.

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Story summary

U.S. interest rates have seen significant fluctuations, declining for nearly 40 years post-1970s inflation.
The federal funds rate hit the zero lower bound during the Great Recession and the COVID-19 pandemic.
As of May 2025, the seven-year ZLB risk stands at approximately 9%, shaped by interest rate expectations and uncertainty.
Higher expected rates lower ZLB risk, while increased uncertainty raises it, reflecting 2018 levels despite current higher rates.