Fed leaves rates on hold and balance sheet reduction is coming soon

No surprises from the US Federal Reserve (Fed) with interest rates being left unchanged at the meeting last Wednesday. The statement contained some tweaks in wording with job gains now upgraded to “solid” and inflation is noted as “running below 2%”. Meanwhile, balance sheet reduction (the unwinding of quantitative easing) is now expected to take … Continue reading “Fed leaves rates on hold and balance sheet reduction is coming soon”

Are negative rates helping?

These three charts suggest not. Desperate times have prompted desperate measures. But is the extreme medicine working? Savers and investors may wish to look away now. Savers and investors need economies to grow: it’s good for company profits that flow back to investors and it helps keep interest rates stable for savers. This all makes … Continue reading “Are negative rates helping?”

Monetary policy: a bridge over troubled waters?

“The European Central Bank’s actions can only build a bridge to the future. The project must be completed through decisive actions by governments – both individually and collectively – to address the underlying causes of our current challenges.” – European Central Bank President, Mario Draghi, September 2012. Eurozone:  And friends just can’t be found Mr … Continue reading “Monetary policy: a bridge over troubled waters?”

Bank of England cuts interest rates to 0.25%: what next?

The Bank of England has cut rates for the first time in seven years. We offer the latest market forecasts and assess the impact on savings and mortgages. The Bank of England (BoE) announced a quarter point cut in the UK bank rate to 0.25% at midday today (Thursday), marking the first change in more … Continue reading “Bank of England cuts interest rates to 0.25%: what next?”

The negative interest rate experiment

The start of this year has seen a continuation of central banks’ policy experimentations, with Japan joining the eurozone, Switzerland, Denmark and Sweden in employing negative interest rate policies (NIRPs). NIRPs can refer to economies’ base interest rates, or more specifically to negative central bank deposit rates (i.e. the interest rates that central banks pay … Continue reading “The negative interest rate experiment”

Paying to lend? The failure of negative interest rate policy

We look at the economic and market impact of negative interest rate policy and where policymakers might head next. It has been a universal truth that borrowers need to incentivise lenders to provide loans, normally via the promise of the return of capital (hence “My word is my bond”) with additional compensation in the form … Continue reading “Paying to lend? The failure of negative interest rate policy”

Even lower for even longer: How low can they go?

Interest rates held, for now…. Mark Carney surprised markets by not cutting interest rates. However, he has made it clear that he is poised to cut whenever the moment demands and while this threat hovers over markets, slightly bonkers asset pricing can persist. But while the high price of defensive assets may persist, it doesn’t … Continue reading “Even lower for even longer: How low can they go?”