As negative rates look to be an increasingly lengthy feature of central bank toolkits, and one that is now debated in the US and UK, we review recent academic literature on the pros and cons. A new ECB paper takes a more favourable view but acknowledges the risks on banking sector profitability. While the Riksbank, the first central bank globally to exit negative rates, are more cautious stressing the emergence of asset bubbles.
We also have an Exclusive by Caroline Grady on what to expect from the ECB on Thursday.
This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
(total reading time: 2 mins)
As negative rates look to be an increasingly lengthy feature of central bank toolkits, and one that is now debated in the US and UK, we review recent academic literature on the pros and cons. A new ECB paper takes a more favourable view but acknowledges the risks on banking sector profitability. While the Riksbank, the first central bank globally to exit negative rates, are more cautious stressing the emergence of asset bubbles.
We also have an Exclusive by Caroline Grady on what to expect from the ECB on Thursday.
Enjoy!
Bilal
The Pros And Cons Of Negative Interest Rates Policy (NIRP) (4 min read) As central banks go deeper into unconventional policies, there is more speculation that more central banks will engage in negative interest rates policies (NIRP). Even the Fed may consider this. We therefore pull together some of the latest academic thinking on the topic. In this Deep Dive, we focus on two papers one by the ECB and another by some Swedish academics…
( Stefan Posea │ 3rd June, 2020)
ECB Preview: Time To Step Up PEPP (3 min read) Thursday’s ECB governing council meeting comes amid a shifting European landscape. Since the last policy meeting in April, the ECB now faces the potential end to Bundesbank participation in its asset purchase programme and, on a more positive note, a sizeable European recovery fund that could alleviate some of the burden on monetary stimulus…
(Caroline Grady │ 3rd June, 2020)
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)