HALISTER1: Negative Rates Have Adverse Effects on Markets: Pimco

Negative Rates Have Adverse Effects on Markets: Pimco

(Bloomberg) -- Policymakers have underestimated the economic risks of negative interest rate strategies, Pimco’s CIO Scott Mather writes in a note to clients.
  • Says the efficacy of negative rates on growth or inflation is far from certain; those strategies have not been successful so far
  • Negative rate policy behind the widening of credit and equity risk premiums, increased volatility, reduced credit availability from a more stressed bank system
  • Markets see central banks experimental moves are seen as “desperate”
  • Negative rates can reduce inflation expectations and step up currency wars
  • Reduced bank interests margins and cost of capital increase among other adverse effects of those policies
  • Sees asset purchase policies or a change in inflation target as more effective tools
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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21429Z US (Pacific Investment Management Co LLC)

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Scott Mather (Pacific Investment Management Co LLC)

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