Bernanke Says Serious Thought Should be Given to Negative Rates

Former Fed Chairman Ben Bernanke thinks policymakers should give serious thought to implementing negative rates.

The man who led the U.S. central bank immediately before Janet Yellen doesn’t believe his former colleagues should rush to that kind of ultra-aggressive policy stance.

But of all the options the Fed has for stimulus, going to negative rates may not be as drastic as it seems, Bernanke said in a blog post this week.

“It would be extremely helpful if central banks could count on other policymakers, particularly fiscal policymakers, to take on some of the burden of stabilizing the economy during the next recession,” Bernanke said, writing in his position as a consultant to the Brookings Institution think tank.

“Since that can’t be assured, and since the current low-interest-rate environment may persist, there are good reasons for the Fed and other central bankers to consider changes in their policy frameworks,” he added. “The option of raising the inflation target should be part of that discussion. But … it is premature to rule out alternative or potentially complementary approaches, including the possibility of using negative interest rates.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza