I am ambivalent about negative rates

By FXStreet Over the weekend, I got a text from a friend of mine in the U.K. who was essentially asking my opinion about Central Bank’s policy on negative rates, “Allo! Hoping to pick your brain a bit. What are your views on negative Euro interest rates and how long might they go on for?”

While I first replied and said that I had to be honest, I was no expert on the hazy facets of the monetary policy transmission mechanisms that are unprecedented in nature being used by Central Banks currently, I would happily put my mind to it and respond. Presumably, one might be thinking to take out a loan in euros in exchange for a U.K. mortgage, denominated in sterling – Then that brings us to where I’m slightly more versed to advise upon when we are talking about FX risk and hedging given my corporate FX risk and industry background.

But, let us now look at this mechanism that has been taken on by the Central Banks of late. The main motivation for these decisions is to further ease the already accommodative monetary policy stance to fight the growing threat of deflation amid downward pressures to inflation expectations, essentially designed …read more

Source:: FX Street