FED Chairman Janet Yellen opened the Pandora box with "negative interest rates" at a press conference after the Federal Open Market Operations Commission (FOMC) on the 17th. He was named by The Economist as Andrew Haldane, one of the world's most influential economists in 2014, and continued to hype across the sea the next day. This topic may cause depositors to lose their wallets.
MarketWatch reported that Andrew Haldane, chief economist at the Bank of England (BOE), said on the 18th that the UK's economic growth and inflation are facing significant downside risks, and further interest rate cuts may be necessary in the future to pull inflation back to the target area.
The Financial Times reported that Haldane pointed out on the 18th that the world may enter the third phase since the outbreak of the 2008 economic crisis, and the lowest interest rate in the UK in history is no longer enough to provide the necessary monetary stimulus.
Haldane believes that if the economy worsens further, just launching negative interest rates may not stimulate consumption, because people will withdraw cash from banks; to make negative interest rates truly play a stimulus function, it is to replace banknotes with electronic wallets similar to Bitcoin technology. In this way, if people do not want to see deposits shrink in vain, they will spend money obediently.
The British Telegraph reported that on the 18th, Haldane proposed to double the Bank of England's inflation target from 2% to 4%. He said the global low interest rate trend makes it more difficult to combat the recession, as official interest rates in large advanced economies have basically dropped to zero. Haldane pointed out that the 2% inflation target was set in the era when interest rates were close to 6%, and now the interest rate is only 0.5%, so the inflation target needs to double.
Haldane In an exclusive interview with BBC Radio 4 3 years ago, he pointed out that the main obstacle to the current economic recovery is those banks that have been reluctant to dispel bad debts. He said that the financial crisis was equivalent to having the British experienced a world war (reduced income and output) on the economic level, and it was estimated that the generation of grandsons could fully repay all the expenses.
Haldane was named the 12th most influential economist in the world in 2014, ranking higher than Thomas Piketty (author of Capital in Twenty-first Century), and Larry Summers (formerly US Treasury Secretary, No. 14).
Dow Jones reported that Yellen said at a press conference on the 17th that a FOMC decision-making member suggested that the federal funds rate should be reduced to -0.125% in 2015 and 2016, which is by no means the main policy option currently under serious discussion.
However, Ye Lun dared not say anything to death. She said that if the economic outlook evolves beyond her expectations and most FOMC decision-makers, all available tools (including negative interest rates) will be taken into consideration.
(This article is reproduced by authorized by MoneyDJ News; Image source: Flickr/epSos.deCC BY 2.0)
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