The Federal Reserve isn’t anticipating the use of negative rates that have been tried in Europe and Japan






The Federal Reserve, which cut its primary interest rate to near zero March 15 in the face of the economic crisis prompted by the coronavirus, isn’t anticipating the use of negative rates that have been tried in Europe and Japan, two Fed presidents said Monday. Traders in fed funds futures markets last week were pricing in the possibility that the central bank will cut its policy rate below zero, which dragged the two-year Treasury yield to a record low. Fed Chairman Jerome Powell has consistently pushed back against the idea of taking interest rates negative, and that message has been echoed by a wide range of U.S. central bankers in recent years. (Bloomberg)

The Federal Reserve further slowed the pace at which it plans to buy Treasuries under the unlimited program that began in March. The U.S. central bank, which has bought more than $1.5 trillion of Treasuries in daily operations over eight weeks in an effort to restore smooth market functioning during the coronavirus pandemic, on Friday said it would buy securities at a pace of about $7 billion a day May 11-15. It bought at a pace of around $8 billion a day this week.
(Bloomberg)

Source: Danareksa Sekuritas Debt Research