While countries around the world might be mulling negative rates, fragile SA probably can't afford them
It is apt that Sweden, a pioneer in the West when it came to the use of negative interest rates to ward off deflation as the global economic slowdown sparked by the financial crisis persisted, is debating the effectiveness of the strategy.
Negative rates have consequences that are undesirable. Pension funds, which hold a huge proportion of “safe assets”, have seen returns on their bond holdings depressed and in some cases have had to pay to lend money to governments. The spread, which saw New York and Berlin on Monday being among cities that have reported their first cases, has led to intense speculation that authorities across the world will introduce a new round of stimulus.
For similar reasons, the prospective of fiscal stimulus from governments is also proving to be ineffective in boosting confidence.
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