by Wolf Richter
The reasons behind the Fed’s No-NIRP stance: It doesn’t work and kills bank stocks. One of the most revealing statements.
Over the years, the Fed has waffled on all kinds of things, from what represents “price stability” to what it will do with regards to asset purchases. But there’s one theme that it has been relentlessly consistent about: a negative interest rate policy (NIRP).
There has been a lot of clamoring for negative interest rates, ranging from bond-fund managers and hedge funds – when rates fall, bond prices rise – to the White House. Last week, futures markets had started to price in negative rates for the federal funds rate, which is the rate that the Fed targets with its policies. The absurdity is just too tempting and juicy: Who wouldn’t want to be paid to borrow money?