Don't expect negative interest rates to be the next U.S. import from Europe...
NEW YORK - Don’t expect negative interest rates to be the next U.S. import from Europe or Japan, as those two economies are providing a real-time cautionary tale of the pitfalls of central bank stimulus efforts gone awry.
Among other consequences, that also leaves a deficit of investment income available to support an aging population that desperately needs it, according to a recent blog post by BlackRock. U.S. President Donald Trump has suggested that the Federal Reserve drive interest rates into negative territory as a way to allow the U.S. government’s to refinance its $22 trillion in outstanding debt and lengthen the amount of time over which it is repaid.“Never say never, but there is a real hesitancy here in the U.S. to take rates below the zero bound,” said Greg Peters, head of multi-sector and strategy at PGIM Fixed Income.
Negative rate policy is something Fed officials have downplayed as appropriate because of the risks it entails and the likely political opposition.Anne Mathias, a global rates and FX strategist at asset manager Vanguard, also said negative policy rates are unlikely. Andrew Hsu, co-portfolio manager of the DoubleLine Total Return Bond Fund, warned about the side effects of negative rates.
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