Fed Has No Plans for Negative Interest Rates
Fri Jul 01 2016
Jim Andrews (456 articles)

Fed Has No Plans for Negative Interest Rates

Federal Reserve Vice Chair Stanley Fischer struck an upbeat tone regarding the U.S. economy in an interview Friday morning on CNBC.

The central banker played down the effects of last week’s Brexit vote on the U.S. economy, saying that it “clearly is a huge event for the U.K., and it’s an important event for Europe,” but that because our direct trade relationship with Britain is relatively small, it would not have a large, direct impact on Americans.

He also said that the Federal Reserve is not currently considering using negative interest rates, despite the fact that an increasing number of foreign central banks are trying out the strategy as means to increase inflation and stimulate economic growth. “One of the things you learn if you’re a central banker is never say never,” Fischer said. “But. . . .we have no plans to move into negative territory and we will try to avoid ever getting to that position.”

He argued that recent economic data has “done pretty well” outside of a disappointing May jobs report, and that domestic data point, like GDP growth and jobless claims numbers, are more important to Fed bankers than what is happening in Europe. The Commerce Department recently revised up its estimate of economic growth for the first quarter to a 1.1% annual rate, rather than the 0.8% pace reported last month. Advanced estimates of second quarter growth look strong as well, and jobless claims numbers suggest that the May jobs report could be an outlier.

That said, futures markets predict that the Fed won’t raise rates again until next year, even though the Fed’s latest data release show most FOMC members see more movement on interest rates this year. The next FOMC meeting takes place July 26 and 27.

Jim Andrews

Jim Andrews

Jim Andrews is Desk Correspondent for Global Stock, Currencies, Commodities & Bonds Market . He has been reporting about Global Markets for last 5+ years. He is based in New York

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