In typical FedSpeak, the latest announcement from the Federal Reserve details how the future economic conditions are improving (like they have been stating for the past five years). For anyone who still has money in a bank receiving zero interest, the obvious question is why? Especially when the Fed wants to study negative interest rates where you will pay the bank money to holdup hold your money.
David DeGerolamo
It’s Bullard’s Turn To Pour Cold Water On Stock Ramp, Says December Taper Possible, Considers Negative Rates As Well
But the punchline in the aftermath of the ECB rumor on just this is that the Fed just doubled down on the ECB’s ownc currency war gambit:
- BULLARD WOULD LIKE STUDY OF NEGATIVE RATE FOR EXCESS RESERVES
In other words, it will soon cost everyone to keep money with the bank. As for NIRP on reserves: will banks consider lending out reserves if they have to pay a whopping 25 bps on amounts when they can use the same reserves as deposit-based collateral to buy ES and generate 20% annual returns via the S&P? Why no. They would not.
