President Donald Trump on Tuesday tweeted that the US should accept the "gift" ofnegative interest rates , renewing his calls for the Fed to push rates down.- In March, the
central bank lowered rates near zero in a historic move to soften the economic blow of the coronavirus pandemic. - Still, the bank has consistently said it would use other tools to aid US
markets and the economy instead of negative rates. - "When you have negative rates, you wind up creating downward pressure on bank profitability, which limits credit expansion," Powell said in a congressional testimony in February.
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President Donald Trump on Tuesday tweeted that the US should accept the "gift" of negative interest rates, joining other countries that already have them.
"As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the 'GIFT'. Big numbers!" Trump tweeted.
Trump has long called for the US
Since, the Fed has gone far beyond its 2008 playbook to support the US economy and financial markets amid the crisis, pumping trillions of dollars of liquidity into the system and supporting local and state governments and small businesses.
Still, in May, the Fed-funds futures market began to price in negative rates by next year, baffling investors, according to Bloomberg.
Setting interest rates below zero would in theory boost consumer spending and business investment by making it easy to get a loan. Still, places with negative rates such as Japan and Europe have had mixed results, The Wall Street Journal reported — consumers don't always spend more, central banks have had a hard time raising rates again, and it leaves little room for action if there's another economic downturn.
In addition, central bank officials have continuously pushed back on negative rates. In February,
"When you have negative rates, you wind up creating downward pressure on bank profitability, which limits credit expansion," Powell said in a congressional testimony.
Industry watchers agree that the unprecedented actions of the Federal Reserve to cushion the economy amid the
Others think that negative interest rates are inevitable in the US. In a Sunday note, Scott Minerd of Guggenheim said he thinks that negative interest rates will come to US 10-year Treasury bonds in the next few years.
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