JPMorgan says benefit of negative U.S. rate might outweigh costs

Bloomberg/Joanna Ossinger/5-12-2020

“’Mildly negative rates such as -10 basis points for a year or two could be beneficial in the current conjuncture,’ strategists led by Nikolaos Panigirtzoglou wrote in a note Tuesday. However, he added that ‘we still view a negative Fed policy rate as unlikely,’ and emphasized that rates would need to be just slightly negative, and not for too long, in order to be effective.”

USAGOLD note:  For a year or two?  One wonders if once we start down the “below zero track” there will ever be a turning back.  We all remember what happened with the taper tantrum and more recently the quick turnaround on winding down the Fed’s balance sheet. On Wednesday, Chairman Powell said negative rates were not something the FOMC was looking at.

Related: Reuters / Once taboo, investors begin to imagine negative U.S. rates / Saqib Iqbal Ahmed, Tom Westbrook / 5-12-2020