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.The Federal Reserve could reverse its course on negative interest rates if the US economic recovery falters, aThe 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.
Zach Pandl, Goldman's co-head of global foreign exchange, rates, and emerging markets strategy, still sees a future where the US benchmark rate slides below zero. "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 toldA 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 interest rate further could even exacerbate the economic slump, as such policy is relatively untested and could weaken other forms of monetary relief.
"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."
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