As we already commented extensively, while the Fed’s dovish non-hike was a violent surprise for the market, and has led to what may be the first thoroughly unanticipated (at least by the market) policy mistake by the Federal Reserve (judging by the market), the biggest news was the very symbolic, yet all too ominous, negative interest rate forecast in the Fed’s projection materials by one FOMC member.

This was the first time in Fed history that an FOMC member has on the record predicted NIRP in the US.

Janey Yellen’s subsequent non-denial during the press conference did not exactly inspire hope that the Fed was just “joking”:

I don’t expect that we’re going to be in a path of providing additional accommodation. But if the outlook were to change in a way that most of my colleagues and I do not expect, and we found ourselves with a weak economy that needed additional stimulus, we would look at all of our available tools. And that would be something that we would evaluate in that kind of context.

Furthermore, when considering that virtually all of Europe is already flooded by NIRP, and earlier Bank of England’s Andy Haldane, one of the otherwise more rational members of the central bank, advocated negative rates in the UK, one can be virtually certain that unless there is a dramatic rebound in the global economy, the next step by Yellen will not be a rate hike, but easing (just as Goldman predicted) right into negative interest rate territory.

What would NIRP in the US mean in practical terms?

For the answer we go straight to, drumroll, the Fed itself whose New York economists discussed precisely this topic just three years ago and issued a very stark warning (which apparently the Fed itself decided to ignore), saying “If Interest Rates Go Negative . . . Or, Be Careful What You Wish For.”

This is what the New York Fed said in August 2012: