Negative interest rates?

stackmans

stackmans

Active Member
What are the chances the RBA will go negative?

They have said consistently that they would never go negative however they also said just 34 days ago that the would never use QE in Australia and now what?

I'm not interested in discussing the pros and cons of negative rates just the likelihood that it will happen in Australia.


My 2c is that its likely. Thoughts?
 
stackmans said:
They have said consistently that they would never go negative however they also said just 34 days ago that the would never use QE in Australia and now what?
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Where did they say they will never do QE? I've listened to many talks (some 5 months old) where Philip Lowe openly talks about doing QE.

Also technically there is no need to go negative. It's arbitrary if they do or don't. My guess is they won't, as it's easier and more effective to just do QE.
 
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leo25 said:
Also technically there is no need to go negative. It's arbitrary if they do or don't. My guess is they won't, as it's easier and more effective to just do QE.
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This, plus the next step will be Fiscal. Central Banks have been saying for time that Fiscal policy/stimulus will be required during the next downturn.
 
Last minutes of the RBA meeting: confirmation in their mind that their chosen accommodative monetary policy measures (along with fiscal) are working to help reduce the fallout from the declining economic circumstances AND that they will continue to be required.

RBA made it clear that they are willing to purchase government bonds if the yield drops below their forecasted target.

the Bank had purchased government bonds on only one occasion since the previous meeting, although it was prepared to scale up these purchases again, if necessary, to achieve the yield target and ensure bond markets remain functional.
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So forward guidance remains on the agenda as Lowe has long maintained, purchasing government bonds remains on the agenda as Lowe has long maintained, public comments around fiscal policy remain on the agenda as Lowe has long maintained, negative rates are not on the agenda as Lowe has long maintained, purchasing corporate bonds are not on the agenda as Lowe has long maintained and a further interest rate cut is not on the agenda as Lowe has long maintained.

It's all going to plan as I see it.

https://rba.gov.au/monetary-policy/rba-board-minutes/2020/2020-06-02.html
 
Negative rates this year for sure. Plus QE, plus infrastructure stimulus, and its all not going to work, we will still go into a prolonged multiyear recessionary environment.

Record unemployment -> now record vacancy rates -> property crash -> banks credit crunch/crash -> recession/depression.

If melbournes covid situation gets worse and spreads to sydney we will see the economy tank even more.
 
mmm....shiney! said:
Dr Andrew Leigh, ALP member for Fenner: Governor, wouldn't a year of negative rates be better than a decade of zero rates?
"
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I would love to know what he thinks negative rates means in reality. My guess is he has no clue, he probably thinks he is cool by saying “negative rates”.

Also if negative rates ever did manifest, it will never make its way to the person on the street.
 
It would be a disaster for the man on the street! Negative rates and no job. It would almost destroy the self funded retirees dream and would only really work in a universal wage scenario for any meaningful time.
 
Cracka said:
...and would only really work in a universal wage scenario for any meaningful time.
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Is there even any doubt this is on the cards? It's straight outta the playbook here. We've got helicopter money already.
 
Negative rates wont happen until we are all stuck with digital money.
That way if you wont spend it, they will spend it for you.
Just another way of destroying people and their finances.
Those who control the money make the rules.
 
leo25 said:
Where did they say they will never do QE? I've listened to many talks (some 5 months old) where Philip Lowe openly talks about doing QE.

Also technically there is no need to go negative. It's arbitrary if they do or don't. My guess is they won't, as it's easier and more effective to just do QE.
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Tim Wilson and the RBA had a bit of a tiff over this subject last year, in public and in a senate inquiry.
You are absolutely correct, QE was never off the table and was openly discussed as a probability, Negative interest rates were rejected. there are senate transcripts between the RBA and Tim Wilson to back up what you have stated.
I had seen many other conversations at many business forums with the rba pushing QE and rejecting Negative interest rates. I Just used the senate one as Im sure it would be the easiest transcripts to find.
 
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Westpac Chief Economist on negative rates:

as a “small open economy with large foreign liabilities”, Evans said Australia was “likely to benefit through negative rates with a lower exchange rate”.
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snip

“Perhaps, under such circumstances*, in 2021 the negative interest rate/intervention debate might get a wider hearing,” Evans said.
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https://stockhead.com.au/news/think-big-could-negative-interest-rates-become-a-reality-in-australia/

*he rising value of the AUD and low growth rates.
 
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