Negative interest rates are the right way to go, says IMF, despite warnings about their side effects from a fund management boss
Story from This is Money
Negative interest rates are the right policy for the world economy, the International Monetary Fund has said, despite some loud warnings about their side effects from a fund management boss.
A study published yesterday, ahead of the IMF’s spring meeting in Washington DC this week, has concluded that on balance, negative interest rates ‘help deliver additional monetary stimulus and easier financial conditions, which support demand and price stability.’
In the paper, the IMF’s Jose Vinals, Simon Gray and Kelly Eckhold noted that wholesale interest rates have declined while credit growth in the eurozone has also picked up since the move by the European Central Bank to adopt negative rates.
They added that negatives rates in the region had also encouraged investors to switch to low risk government bonds and reduced borrowing costs for companies.
Money Questioner says:
The prospect of money becoming fully digital is not as absurd as it sounds. And if money is digital, it can’t be hidden under the mattress, which would be the usual way to avoid negative interest rates. Negative interest rates are possibly the next step towards warding off deflation although the alternative of increasing money supply through more QE remains an option.