JPMorgan saw the benefit of negative interest rates in the US
Federal Reserve is still unlikely to move to a negative interest rate, but if the central bank resorted to such a measure, it could ultimately be a favorable factor for the U.S., says JPMorgan Chase & Co analyst Nikolaos Panigirtzoglou
However, he added that the bank "still considers the Fed's negative rate unlikely," and stressed that in order to be an effective instrument, the rates should be only slightly below zero and stay in the negative zone not for long.
The subject of negative rates has been rising in recent days, as futures are now pawning at prices to reduce the cost of borrowing to negative levels, although members of the Federal Reserve has so far generally rejected the idea.
Since then, the euro area has seen significant growth in lending, writes Panigirtzoglou. The easing of funding conditions and the smoothing of financial fragmentation has outweighed the negative effect of the decline in the industry of money market funds working with the euro and the decline in interbank market activity. The strategy allows for similar potential consequences for the US.
Fed Chairman Jerome Powell in a webinar on Wednesday opposed the prospect of the central bank setting negative interest rates in the U.S., but did not completely rule out such a scenario as a potential instrument in the future.
He noted that representatives of the Fed discussed whether to follow the example of other central banks in this direction, and said that "we are not considering" such an option.
May 2021 futures rate on federal funds still means that the rate is sinking into a negative zone.