“There is no point” in the Fed switching to negative interest rates: JPMorgan

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As markets begin to assess the possibility that the Federal Reserve will bring interest rates into negative territory, David Kelly of JPMorgan Asset Management argues that such a political decision makes little sense.

“Going to negative rates is pointless … at all,” Kelly Kelly, global chief strategist at JPMorgan Asset Management, told CNBC “Squawk Box Asia” on Friday.

“Negative rates have not helped the Japanese economy, they have not helped the European economy,” said Kelly, referring to the well-documented economic challenges in these places despite the adoption of such policies. “All they do is block the banking system, make it more difficult for everyone to function. “

Furthermore, this is not necessary at a time when the government “essentially allows and monetizes unlimited budgetary expansion,” he said.

“If you want to stimulate the economy directly, just put more money in the hands of consumers and businesses, Congress doesn’t seem shy about doing it,” said Kelly, adding that he expected An additional $ 2 trillion in stimulus ”before it’s over. “

This is in addition to the more than $ 2 trillion already approved. The historic amount of stimulus comes at a time when economies around the world have been devastated by sweeping restrictions implemented to stem the spread of the coronavirus pandemic.

Coupled with reports that the Federal Reserve stepped in to buy bonds, including some in the high-yield sector, Kelly said, “It’s a tremendous monetary expansion here, you don’t … need to switch to negative rates. .. to try to help this. “

The strategist’s opinion came after President of the Richmond Federal Reserve, Thomas Barkin, told CNBC recently that he does not expect negative interest rates to become official policy.

Traders on Thursday posted a negative federal funds rate by December and lasting at least until January 2022, as the central bank is expected to maintain its key rate as banks charge each other for overnight loans around from the zero level that it is currently.

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