what is zero bound 
zero bound is an expansionary monetary policy tool where a central bank lowers short term interest rates to zero if needed to stimulate the economy a central bank that is forced to enact this policy must also pursue other often unconventional methods of stimulus to resuscitate the economy understanding zero boundzero bound refers to the lowest level that interest rates can fall to and logic dictates that zero would be that level the main arrow in a central bank s monetary policy quiver is interest rates the bank will manipulate interest rates to either stimulate a stagnating economy or dampen an overheating one clearly there are limits especially at the lower end of the range the zero bound is the lower limit that rates can be cut to but no further when this level is reached and the economy is still underperforming then the central bank can no longer provide stimulus via interest rates economists use the term liquidity trap to describe this scenario 