‘Don’t Do It’: Studies Flash Sub-Zero Rate Warnings to Central Banks

by Dhara Ranasinghe

LONDON (Reuters) – Six years after the ECB cut interest rates below 0%, behavioural finance gurus have a message for other central banks thinking about taking the plunge: don’t.

Rates in the United States, Britain, Norway, Australia, New Zealand, Israel and Canada are at or below 0.25%, so chances are one or more of their central banks will go sub-zero to try and counter the pandemic-fuelled economic funk.

Money markets are pricing in the Bank of England making the move in 2021 while New Zealand’s central bank has already asked banks to prepare for negative rates.

New studies however seem to reinforce what some policymakers have long feared — negative rates are ineffectual and perhaps even counterproductive.

Continue Reading at Reuters.com…