Some central banks have cut interest rates into negative territory in an effort to eke out some economic growth, but the step could spur unintended, counterproductive outcomes.
"Negative rates could backfire," Francesco Garzarelli, co-head of macro markets research at Goldman Sachs, said in a note Friday. "At least some segments of the population could feel poorer, and less secure," he said. "Rather than lifting consumption and borrowing, ultra-loose monetary policy could perversely lead to an increase in precautionary savings and a slower economic recovery."
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In an effort to ward off potential deflation and bolster nearly flat-lined economic growth, some central banks -- including the European Central Bank (ECB), the Swiss National Bank and central banks in Sweden and Denmark -- have cut rates into negative territory.
A big chunk of the government bond market has gone negative: JPMorgan estimated that in January, around $3.6 trillion worth of developed market government bonds—or 16 percent of its Global Bond Index—was at a negative yield.