An expansive ZERO

A widely expected U.S. cut later this month would take the target for the key federal funds rate to 0.5 per cent from 1 per cent.

The problem with zero is that it dashes market expectations, which are based not on existing rates but on their direction.

In fact, once nominal rates reach bottom, most people will base their lending and spending plans on the assumption the only direction rates can take is back up. So cutting all the way to the bottom might be counterproductive.