– This is the script of CNBC's news report for China's CCTV on February 1, Monday.
Welcome to CNBC Business Daily, I'm Qian Chen.
The Bank of Japan (BOJ) has just joint the club of central banks with negative interest rates... setting its official interest rate to be -0.1%.
However, something you need to know about such a negative rate.
The rate cut is on excess reserves to minus 0.1%, meaning institutions will have to pay the central bank for the privilege of parking reserves that exceed those required by regulators.
However, the rate on most existing reserves, remains at 0.1%, while the rate for required reserves was cut to zero.
Here are names of other central banks that are having negative rates.
Unlike the single negative rate applied to deposits parked at the European Central Bank, the Japanese move is similar to tiered measures put in place by the Swiss National Bank, which punishes sight deposits, or commercial bank assets.
However, inflation is still the key, according to Eric Robertsen, Head of Global Macro Strategy of Standard Chartered Bank.
[ERIC (t) ROBERTSEN, Standard Chartered Bank Head of Global Macro Strategy] "130840 QE and a negative interest rates around the world, whether its Japan, Europe or the previous eposide of US, obviuosly have a significnat impact on financial asset prices, but the impact on inflation and inflation expectations, as long as oil remains low, is pretty limited. 130857 But what are the central banks trying to achieve, is to put enough liquility in place so that if we do see a pickup in energy prices, and we do see a pickup in commodity prices, then the incentive for people to take more portfolio risk, because they need an inflation-adjusted basis to earn higher yeilds that incentive will be put in place. 130919"
All these central banks have left the FED alone, with its intentions to do
3-4 rate hikes within this year.
Some analysts are seeing lower possibility of such hikes.
[(SOT ---- MEYER) Michelle Meyer, BofA Merrill Lynch] "083817 I think March at this point is probably a pretty low probability. And I think the Fed is taking into account what's happening from other central banks which are continuing to ease. And that's going to impact the dollar and create tighter financial conditions for the US."
After a weak Q4 GDP number and a few other weak economic data, Fed officials acknowledged global developements.
Here's what San Francisco Fed President John Williams got to say.
[(SOT-WILLIAMS) John Williams, San Francisco Fed President ] "What does worry me about things from abroad. What's happening in Europe w/ their economic struggles, whats happening in Asia and understanding that. Overall im actually pretty optimistic about where we are in the US economy and I think we can weather some of these storm that are happening abroad."
CNBC's Qian Chen, reporting from Singapore.
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