Last Tuesday, all eyes were on Federal Reserve Chief Janet Yellen. In prepared testimony, she offered a few hints that interest rate increases may begin this summer. #-ad_banner-#While the crowd is thinking about rate hikes, few are thinking about U.S. interest rates heading lower, or possibly even turning negative. The idea may seem absurd, but is it? The notion of negative interest rates is surely controversial. Some analysts think the Fed would never let it happen, as the massive U.S. money market system would be unable to function efficiently and profitably in… Read More
Last Tuesday, all eyes were on Federal Reserve Chief Janet Yellen. In prepared testimony, she offered a few hints that interest rate increases may begin this summer. #-ad_banner-#While the crowd is thinking about rate hikes, few are thinking about U.S. interest rates heading lower, or possibly even turning negative. The idea may seem absurd, but is it? The notion of negative interest rates is surely controversial. Some analysts think the Fed would never let it happen, as the massive U.S. money market system would be unable to function efficiently and profitably in a negative rate environment. Then there’s the relative strength of the U.S. economy, which is seemingly strong enough to counter the need for more aggressive Fed actions. An alternative view: recessionary pressures from the soaring dollar and weak foreign economies could eventually prove powerful enough to force the Fed into more rate cuts. Thanks to decade-high strength, the dollar is squeezing U.S. multinational firms as profits earned in weaker foreign currencies are worth substantially less in dollars. Thus, analysts see U.S. corporate profits only growing about 7% overall this earnings season, down from the 11% gain projected a… Read More