Traders Mock Powell As Negative Rate Bets Surge



If Jerome Powell hoped that he had put to rest the topic - and debate- of negative interest rates in the US (if only for a few weeks) he failed.
One day after Powell's ad hoc appearance in a Peterson Institute video chat in which Powell was very clear: the Fed doesn't support negative rates even with downside economic risks - the question of when, not if, rates will turn negative continues to dominate.
In an attempt to amplify Powell's message, BofA's rates strategist and former NY Fed staffer Mark Cabana writes today that the Fed is rarely this unified in any view: "US negative rates are not an attractive monetary policy tool", adding that Chair Powell was very clear in this view yesterday. It's not just Powell of course, and below the strategist has assembled a summary "of the uniform and widespread opposition to negative rates from a range of Fed officials." The most striking rebuke of negative rates came from the October 2019 FOMC meeting minutes when "all participants judged that negative interest rates currently did not appear to be an attractive monetary policy tool in the United States". It is very unusual to see this type of broad based agreement on any potential policy stance, according to Cabana who adds that in order to see a material change in thinking on negative rates "it would likely require a leadership change and large scale Fed turnover. Neither of these is likely in the near term."

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