U.S. rate-setters could set negative interest rates in the future, despite their own current doubts about the risks of this unconventional measure, Goldman Sachs predicts.
added that "the financial system in the United States is considerably different from those in countries that implemented negative interest rate policies, and that negative rates could have more significant adverse effects on market functioning and financial stability here than abroad.""There's still a lot of skepticism in the U.S. and I think they would utilize the other tools first.
Goldman Sachs is expecting the U.S. economy to grow above 2% this year. However, if a recession were to hit in the near-term, Hatzius said that the Fed could use forward guidance, quantitative easing and ultimately negative rates to revamp the economy. "If we were to see a recession at some point in the next few years, with interest rates close to where they are now, then you would only have 150 basis points or so for conventional interest rate cuts — that's only about a third of the typical reduction in short-term rates," he said.The federal funds rate stands at 1.5 – 1.75%. The Fed signaled at its last meeting, in December, that it does not expect to change this rate in 2020.
also forecast a growth rate of about 2% for 2020 – slightly lower from the growth levels seen in 2019.
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