Negative rates: Evidence suggests efficacy of NIRP might not be so significant – Wells Fargo

By FXStreet According to analysts from Wells Fargo initial evidence suggests the costs of the negative interest rate policy (NIRP) thus far have not been as dire as some had feared but it also seems the benefits of breaching the zero lower bound may not be all that significant either.

Key Quotes:

“Japan’s central bank surprised financial markets earlier this year by announcing it would implement negative interest rate policy (NIRP), bringing to center stage a policy that was once thought to be a mere impossibility. Yet, Japan is hardly the first to announce such an extraordinary measure. Several central banks, including those in Switzerland, Sweden, Denmark and the Eurozone, have been utilizing negative policy rates for quite some time now”:

“Once thought to be an impossibility in practice, negative interest rates are now slowly becoming the policy of an increasing number of the world’s central banks. It is still early innings for NIRP, but thus far, no significant distortions seem to have occurred as a result of negative rates. On the other hand, initial evidence suggests the efficacy of NIRP might not be so significant either.

“Given the lack of apparent disruptions, however, we may start to see more central banks breach the zero …read more

Source:: FX Street