Negative Fed Funds Rate Pricing in for 1st Time

Thursday, markets began pricing in a negative US interest rate environment for the 1st time, a place the Fed is determined not to go, as investors struggled with the economic consequences of the C-19 coronavirus chaos.

Fed officials including Chairman Powell say that they do not see negative rates as appropriate for the US.

But some investors are seeing a much worse outcome for the C-19 coronavirus chaos led downturn that could force the Fed to get more radical with its response.

Anything is possible in uncharted waters as far as the US economy goes.

Fed funds futures have begun pricing in a slightly negative rate environment beginning in December.

The Fed cut interest rates to Zero in March and launched lots of programs to bolster markets and backstop the economy as unemployment spiked and growth came to a halt.

SF Federal Reserve Bank President Daly said Thursday the Fed still has tools to boost the economy, and that people she speaks with do not expect a “V” shape recovery.

The Fed is seen as reluctant to cut rates to negative territory due to concerns it may not be effective in stimulating growth, plus it may disrupt the large US money markets.

Have a healthy day, Keep the Faith!

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