The Fed "does not deny" negative rates

The Fed "does not deny" negative rates

Janet Yellen - the Chair of the Board of Governors of the Fed, - doesn’t deny that use of negative rates is possible in the future. However, she admitted that such rates are already implemented in many countries. Janet Yellen believes that use of negative rates is possible during financial crises.

Janet Yellen highlighted that the Fed is analyzing the experience of Europe and Asia on this issue. But before making such decisions, the US Central Bank would use other tools of monetary policy.

These include, for example, the infamous quantitative easing program, which was launched by Ben Bernanke in three rounds. As a result, the Fed purchased bonds for trillions USD. Another result of QE was the return of confidence to financial markets.

The recovery of the stock markets signaled the successful launch of quantitative easing program. However, the question of negative interest rates is on somewhat different plane. Despite their active use in EU and Japan, no one yet can say exactly how much impact they will have on economic growth and, most importantly, in what way it will impact.

At the moment, the Fed has no plans to implement negative rates, but it is only considering such a possibility in the future in the case of a crisis. On the one hand, Yellen's speech can be attributed simply to the desire of rhetoric practicing. However, it is possible to look from a completely different perspective.

The US now is in a situation when it is already possible to carry out gradual normalization of monetary policy. However, this process interferes with the periodic slowdown in economic growth and appreciating currency.

Maybe the last is one of the reasons why the Fed has resorted to such statement, because further increase in interest rates in the US creates risks of further appreciation of the US currency. Therefore, such kind of statement is now particularly pertinent and relevant. Between the lines one can read that the Fed is ready to return to the ultra soft policy and to go even further in the case of economic problems.

On the other hand, such statements are even more confusing the market, which also plays into the hands of the Fed (partly, of course). A transparent Central Bank policy is good when there is a desire to achieve certain goals. Now, the Fed is likely keen to keep the dollar in these positions, and perhaps to make it somewhat cheaper. In such a situation, all good and such statements bring confusion to the market, pushing off the bulls.

Another interesting fact is that in recent years there is the tendency to a gradual depreciation of the dollar. This happens on the background both of changes in the forecasts of the Fed and rising oil prices.

What remains to do in this situation? Follow closely the Fed representatives’ statements and oil prices. It is possible that it is now better to focus on technical analysis and its levels. And, of course, all this opens quite good prospects for earnings on binary options.


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