U.S. Outlook: Have central banks gone too far?
First came short-term rates near zero, then came quantitative easing, now we have negative interest rates. In the battle to prop up the economy, have central banks gone one step too far?
Over the past month and a half, long-term bond yields have plunged, the U.S. dollar is on the decline, and U.S. stocks have erased $3.2 trillion in equity wealth. The latest move by central banks may be to blame.
For an analysis of negative interest rates, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on Feb. 12.Key observations:
- Negative interest rate policies (NIRP) may be a treatment that is worse than the disease.
- NIRP, plus low rates and added capital requirements are making it difficult for banks to lend.
- It may be time for global coordination on fiscal stimulus.