A 2nd wave of coronavirus cases could force the Fed to reconsider negative interest rates, Goldman Sachs says
- A "big setback" such as a second wave of virus infections could force the
Federal Reserveto reconsider negative interest rates, Goldman Sachs strategist Zach Pandl said Thursday. Fedchief Jerome Powellreiterated Wednesday that such policy wasn't on the table, but "policymakers are going to want to try new things" if the economy tanks further, Pandl told CNBC.
- The strategist warned that pushing rates below zero could do more harm than good, and that additional fiscal relief will likely arrive before the Fed reverses course.
- Visit the Business Insider homepage for more stories.
The Federal Reserve could reverse its course on negative interest rates if the US economic recovery falters, a Goldman Sachs strategist said Thursday.
The central bank has already issued relief policy of record scope and size to defend against the coronavirus pandemic, but chief Jerome Powell reiterated Wednesday that negative rates were still out of the picture. Where other nations have either implemented such policy or appeared open to doing so, Powell's stance has held strong.
Zach Pandl, Goldman's co-head of global foreign exchange, rates, and emerging
"If the economy has another big setback ... where you have a second wave of infections and it would really take the recovery off course, then I do think that that opens up a possibility of a range of additional actions," Pandl told CNBC's "Street Signs Asia."
Read more: A real-estate investor who generates $342,000 of annual cash flow shares his unique spin on a popular investment strategy that's helped land him 114 units
Additional fiscal aid from Congress will likely arrive before the Fed takes any additional action, Pandl added, and even then, negative rates serve as a last resort. Cutting the
"Policymakers are going to want to try new things if the economy is really struggling for a period of time," the strategist said. "So in that scenario, perhaps they can consider it; otherwise I think it's pretty low probability at this point."
JPMorgan analysts made similar claims on Tuesday, warning that any immediate benefits gained from negative rates could quickly give way to long-term dislocations. The bank said it views a negative US rate as "unlikely," and cautioned that even "mildly negative" rates could bring a net negative to the US economy in as little as two years.
Still, the prospect of negative US rates isn't without its fans. President Donald Trump revived calls for such policy on Tuesday, calling negative interest rates a "gift" to participating countries and urging the US to adopt them.
Now read more markets coverage from Markets Insider and Business Insider:
Trump alleges 'rich guys' intentionally talk the stock market lower for short-position profits
HSBC lost nearly $200 million in a single day amid gold-market turbulence
BTIG says to buy these 25 under-the-radar stocks that have been neglected for years because they're tempting M&A targets with big upsideRead the original article on Business Insider
- Air India passengers stranded in Siberia for 2 days were abandoned by the crew, had to sleep on the floor, and were only given bread and rice, relative says
- Foreign investors have been dumping vast amounts of Chinese assets, and putting money there will only get riskier
- Meet the newest employee at Elon Musk's SpaceX. He's 14.
- A complete itinerary for your 3 days in Srinagar
- List of famous things to buy in Munnar
- Ads that sailed into the eye of a controversy
- India tops world ranking in digital payments, records 89.5 million transactions in 2022: MyGovIndia
- Will regulate AI and ensure it doesn't harm digital citizens: Rajeev Chandrasekhar