There is little chance the US Federal Reserve will take interest rates into ne
There is little chance the US Federal Reserve will take interest rates into negative territory even as financial markets have begun pricing in such a move for the first time, fund managers and economists said on the Reuters Global Markets Forum.
Fed funds futures, which are a gauge of where markets expect the Fed’s benchmark overnight lending rate to be, are now pricing in a slightly negative rate environment beginning in December.
Under a negative rate policy, financial institutions are required to pay interest for parking excess reserves with the central bank. Excess reserves refer to surplus cash beyond what regulators say banks must keep on hand. That way, central banks penalise financial institutions for holding on to cash in the hope of prompting them to boost lending to businesses and consumers.
The European Central Bank (ECB) introduced negative rates in June 2014, lowering its deposit rate to -0.1% to stimulate the economy.
The Bank of Japan (BOJ) adopted negative rates in January 2016,…