Is it time to brace for negative interest rates in the U.S.? - Yahoo Finance: "Before the recent turmoil in the financial markets began, the Fed raised rates in December for the first time in nearly 10 years and signaled the possibility of four interest-rate hikes in 2016.
But recent financial volatility may be forcing the Fed to rethink its planned steps. Guy LeBas, chief fixed income strategist at Janney, says it's possible that the central bank will go the other way and introduce negative rates.
“In the eurodollar futures market, for example, there was only a single rate hike priced in between today and 2017,” said LeBas. “That scenario is very plausible, but just as plausible is that 12 months from now we head back to the Zero Lower Bound, and perhaps we’re even talking about negative interest rates in 2017.”
The move to negative interest rates has already happened overseas as central banks have run out of options to spur growth. Sweden was one of the first major economies to introduce interest rates below zero in February of last year, followed by the Bank of Japan in January of this year.
When Federal Reserve Chair Janet Yellen was asked about negative rates during her semiannual testimony to Congress last week, she said the option is "not off the table."
Her comments come as inflation, a key data point for the Fed, is stuck below the central bank’s 2% target.
“Since the end of the Great Recession, we’ve barely had inflation. As a society, we no longer know what causes inflation,” said LeBas. “QE was supposed to cause inflation; it did not. Policymakers are certainly coming around to that uncertainty.”"
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