Goldman Sachs says a second wave of coronavirus could make the Fed rethink negative interest rates

[Sergey Golubev]

Goldman Sachs says a second wave of coronavirus could make the Fed rethink negative interest rates

Federal Reserve Chairman Jerome Powell on Wednesday reiterated that the central bank is not considering negative interest rates.

A second wave of coronavirus that causes another “big setback” in the U.S. economy could prompt the Fed to consider a range of new policy options, including cutting interest rates into negative territory, said Zach Pandl, co-head of global foreign exchange, rates and emerging markets strategy at Goldman Sachs.
But such a monetary policy wouldn’t be “very helpful” to the economy, he added.

“But who knows, policymakers are going to want to try new things if the economy is really struggling for a period of time,” he added. “So in that scenario, perhaps they can consider it, otherwise I think it’s pretty low probability at this point.” 

Pandl didn’t elaborate on why negative interest rates wouldn’t be helpful. But many analysts have long doubted the effectiveness of such a policy, citing the experience of some European countries and Japan which have struggled to grow their economies even after adopting negative rates for years.

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Chart was made on MT5 with Brainwashing system/AscTrend system (MT5) from this thread (free to download) together with following indicators:

• MaksiGen_Range_Move MTF - indicator for MetaTrader 5
• Ichimoku Cloud - indicator for MetaTrader 5
• ColorSchaffTriXTrendCycle - indicator for MetaTrader 5

Same system for MT4:

1. Brainwashing. Trades: manually and using EAs (MT4)
2. Brainwashing EAs - the thread (MT4)
3. Brainwashing: system setup for trading manually and for EAs (MT4) - the thread 
4. Brainwashing: system development (MT4) - the thread