Fed Would Consider “Negative Interest Rates”

Speaking of Fed rate hikes. Or better yet, the lack of them. So. Do you remember when I told you that in the next recession, that the Fed’s quiver was just about out of arrows, and that the arrows that remained were desperate measures?  You know, like negative deposit rates.  Well, get this. Fed member Dudley decided that now was the time to begin to grease the tracks for negative rates.  Let’s listen in. “Some of the experiences in Europe suggest maybe we can use negative interest rates and the costs aren’t as great as you anticipate. So I would think that in a future episode that the Fed would consider it.”

So, in other words, in the next recession, you can look for negative interest rates. And if that’s the case, then you might as well, begin to get used to it, because the next recession in just around the corner.  I read this weekend that there’s a group of economists that get asked every month by Bloomberg to estimate the likelihood that the U.S. Economy will go into a recession within a year, and for the past year, they’ve put the odds at 10% (so not much chance, eh?) Well, this month the odds rose to 15%… Still no chance, according to these economists that the U.S. will experience a recession in the next year. Apparently, these economists had been standing in line for the grand opening of the new IKEA store here in St. Louis, and missed all the recent data that shows the U.S. economy slowing down again.

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