Fed Won’t Move Rates Negative, Says Morgan Stanley’s Sheets

The video discusses the high risk of deflation in 2020 and the potential for inflation in 2021-2022, driven by policy easing and fiscal stimulus. It explores the possibility of negative interest rates in the US, highlighting the risks and historical underperformance of economies with such policies. The Federal Reserve's reluctance to adopt negative rates is noted. The Bank of England's approach is also examined, considering a funding scheme for banks but not cutting target rates below zero, due to potential negative impacts on the banking system and consumer sentiment.

What is the primary reason Morgan Stanley believes an inflationary outcome is more likely in 2021-2022?

• Increased global trade

• Unprecedented policy easing and fiscal stimulus

• Rising oil prices

• Decreasing unemployment rates

Why might the Federal Reserve be hesitant to implement negative interest rates?

• Negative rates are easy to implement

• Negative rates can disrupt the financial system

• Negative rates have a successful track record

• Negative rates boost consumer confidence

What is one potential negative impact of negative interest rates on the economy?

• Increased loan growth

• Improved stock market performance

• Higher consumer confidence

• Disruption of lending and financial conditions

What might the Bank of England consider implementing for banks?

• A new currency system

• A complete ban on negative rates

• A funding scheme with rates slightly below zero

• Higher interest rates for loans

What could give the Bank of England pause in implementing negative rates?

• High inflation rates

• A strong economic recovery

• Positive impacts on consumer sentiment

• The potential negative impact on the banking system