Negative Interest Rate Economies: Spot the Odd One Out – Deutsche Bank
Oliver Harvey,Macro strategist at Deutsche Bank, suggests that Central
banks’ experiment with negative interest rates continues apace this
year, with the BoJ the latest to have dipped a toe in the water and the
ECB edging further towards the deep end last month.
Key Quotes
“The
challenge for most policymakers is getting unconventional monetary
policy to help economies escape from a liquidity trap, with record low
interest rates failing to generate much in the way of inflation or
growth. There is one exception, however. Can you guess which it is?
The
problem for the Riksbank is surely that if inflation maintains its
current steady upward trajectory they may be faced with a major
communication challenge in having to re-price the market later this
year. The latter is currently pricing negative rates until 2018, yet the
output gap may have completely closed and a sharp rally in oil could
quickly see CPIF, the inflation measure the Board increasingly talk
about, above target. Inflation numbers, like today’s, should continue to
be watched closely. Stay long SEK.”
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