Even as it has pulled out all the policy stops during the coronavirus crisis, Federal Reserve Chairman Jerome Powell said one area it won’t be going is negative interest rates.
“I know there are fans of the policy, but for now it’s not something that we’re considering,” the central bank leader said Wednesday. “We think we have a good toolkit and that’s the one that we will be using.”
President Donald Trump has been nudging the Fed toward taking its benchmark overnight borrowing rate to below zero, and traders have been pricing in a funds rate that could edge into negative territory by the end of the year or early into 2021.
However, Federal Open Market Committee officials have long doubted the effectiveness of going negative. Large parts of Europe as well as Japan have negative yields across the duration curve of their government bonds, but those economies continue to struggle and had been slowing well before the coronavirus impact struck.
“The committee’s view on negative rates really has not changed. This is not something that we’re looking at,” Powell said.
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