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Following a period of extreme turmoil in the wake of the Covid-19 pandemic, the Federal Reserve’s (Fed) swift response has alleviated liquidity challenges but now what? Within this hypothetical outlook, we briefly touch upon the additional untapped policy tools that remain for the Fed to draw upon and focus our analysis on the circumstances that might cause the Fed to implement negative interest rate policy (NIRP). In doing so, we draw on lessons learned from the European and Japanese experiences with negative rates. We believe there is value in recognizing the chain of events and observations that would lead the Fed to take it under more serious consideration. The Federal Open Market Committee (FOMC) have stated that they are satisfied with their existing toolkit of forward guidance and quantitative easing (QE), while believing that negative rates are not currently attractive in the US.
This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted.
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