A NIRP was the pet scheme favoured by John Maynard Keynes during the depression-ridden 1930s
The U.S. Federal Reserve’s zero interest rate policy (ZIRP), copied from the Bank of Japan’s Keynesian playbook, as well as from the
Fed’s own yield-pegging scheme in the public debt run-up of 1942-1951, has been in place for seven years now. Even if the policy were
to end soon, there’s little chance the Fed’s open market committee will “normalize” the policy rate in the coming decades. The ZIRP
adopted by the Fed (and other central banks) may have begun as a means of “stimulating” economies, but by now, given ZIRPs’ power to
artificially depress bond yields, they’re being retained mainly to provide cheap funding for deficit-spending governments.
The longer the Fed waits to “normalize” the Fed Funds rate, the more likely it’ll face some new economic-financial “crisis” that
allegedly justifies a further delay in rate-hiking. Result: perma-ZIRP. Indeed, in recent years, Federal Open Market Committee
statements have lamely attributed interminable rate-hike delays to crises in Greece, Russia and China.
Over the past two years, markets have steadily reduced their estimates of the level of policy rates of major central banks by the end
of 2017. There’s an estimate of a negative rate for the ECB, which implies a shift from a ZIRP to a NIRP (negative interest rate
policy). That shift wouldn’t be unprecedented. Central banks in Denmark, Sweden and Switzerland already have adopted NIRPs and since
2012 the ECB itself, with a policy rate of merely 0.05 per cent in the past year, has said that it too is open to a NIRP. So also is
the Bank of England.
Top Fed officials certainly don’t oppose a NIRP. Fed head Janet Yellen, asked about the emergence of a NIRP preference last
September, said “negative rates was not something that we considered very seriously” but “if the outlook were to change in a way that
most of my colleagues and I do not expect… we would look at all of our available tools.” Translation: she’s not against a NIRP.
All this has led some economists (especially bearish ones) to predict the Fed will soon enact a NIRP. We’re not yet of that opinion,
but not because we doubt the Fed would try a NIRP. At this stage we’re not so bearish as to believe a financial crisis or recession
is imminent.
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发表于 6-11-2015 01:24 PM
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