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IPFS News Link • Federal Reserve

The Fed Wants to Test How Banks Would Handle Negative Rates

• http://www.bloomberg.com, by Rich Miller

In its annual stress test for 2016, the Fed said it will assess the resilience of big banks to a number of possible situations, including one where the rate on the three-month U.S. Treasury bill stays below zero for a prolonged period.

"The severely adverse scenario is characterized by a severe global recession, accompanied by a period of heightened corporate financial stress and negative yields for short-term U.S. Treasury securities," the central bank said in announcing the stress tests last week.

In that particular simulation, the unemployment rate doubles to 10 percent, the same level it reached in the aftermath of the last financial crisis.

Three-month bill rates have slipped slightly below zero several times in recent years, including in September after the Fed delayed rate liftoff amid global financial market turmoil, touching a low of minus 0.05 percent on Oct. 2.

1 Comments in Response to

Comment by Powell Gammill
Entered on:

What is there to test. They already do that. Negative interest rates mean they charge you to keep your money with them. What's to lose for them? I'm sure they would hardily embrace the mandatory use of e-currency card (account) and the elimination (illegality) of cash (possession) transactions.



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