Some major central banks are turning to negative interest rates to kick start their economies, but those measures pose headwinds to growth, BlackRock's Chief Investment Officer Russ Koesterich told CNBC's "Rundown".
The Bank of Japan (BOJ) and the European Central Bank (ECB) are among central banks that have effectively started charging commercial lenders for the privilege of parking their funds in recent years, marking one of the most dramatic steps yet in policy efforts to fuel growth after years of lackluster economic activity.
The aim was to encourage banks to lend more by making it costlier to just place funds with central banks but it isn't clear whether the policies have had the intended effect.
"The tool that many central banks, particularly the Bank of Japan and the European Central Bank, have come to rely on is proving to come with some serious baggage," Koesterich said. "It exerts a tax on the banking system and it's very hard to accelerate an economy when the banking sector is struggling."
The BOJ blindsided global financial markets on January 29 by adopting negative interest rates for the first time, amid pressure to revive growth in the world's third-largest economy as it struggled to create inflation. The move aims to motivate banks to both lower lending rates and lend more by charging banks to hold their reserves with the central bank.