FOMC participants foresee persistently
high unemployment and low inflation as the most
likely outcome over the next few years.The recommended
future policy setting of the funds rate based
on the estimated historical policy rule and these economic
forecasts is given as the dashed line in Figure
2.This dashed line shows that, in order to deliver a
degree of future monetary stimulus that is consistent
with its past behavior, the FOMC would have
to reduce the funds rate to –5% by the end of this
year—well below its lower bound of zero.Alternative
specifications of empirical Taylor rules, described in
Rudebusch (2006),also generally recommend a negative
funds rate