Tags: jamie dimon | negative | rates | permanent

Jamie Dimon: 'Really Bad Idea' for Negative Rates to Be Permanent

(Chip Somodevilla/Getty Images)

By    |   Tuesday, 22 October 2019 10:00 AM

Jamie Dimon, CEO of JP Morgan Chase warns that negative interest rates have “adverse consequences which we do not fully understand.”

The European Central Bank last month pushed rates deeper into negative territory, while the Bank of Japan appeared to be laying the groundwork for a similar move, CNBC.com explained.

Dimon says plummeting business confidence caused by the U.S.-China trade war and other geopolitical uncertainty appears to be a bigger risk.

“I think when they did it earlier on, there was a notion that we are saving the European Union, the monetary union, which is one thing. I think as a permanent part of policy, it is a really bad idea. It has adverse consequences which we do not fully understand,” he told CNBC.

“If you want to have growth you better really think through with the policies, not just on negative rates but capital allocation et cetera,” he added. “So, I hope it doesn’t happen in United States,” Dimon said.

Dimon warns that crashing business confidence — caused by the U.S.-China trade war and other geopolitical events — appears to be a bigger risk, he added.

“I think it has caused a slowdown,” he said.

Dimon said that could possibly trigger an economic recession, although the global economy doesn’t look like it’s near one yet.

“My own view — and I am just looking at the possibilities and probabilities — is that it is a slowdown, not on the way to zero,” he said.

Meanwhile, President Donald Trump has been pining for negative rates.

Last month, his desire for such rates was widely panned on Wall Street where strategists and traders said such a move would be unjustified and extreme, and not advisable based on the experience in other countries, Reuters explained.

Trump last month called on the Federal Reserve to push down interest rates into negative territory, a move reluctantly used by other world central banks to battle weak economic growth that risks punishing savers and banks' earnings in the process.

"Certainly the rates can go lower, we know that. We were at zero interest rates from 2008 all the way to 2015 so we know we can go back down to that level. So they can go to zero but what's debatable is whether or not they can go negative," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin.

"Certainly the economy at the moment does not justify such a move. You can argue that negative interest rates have not had the intended effect that the countries that have implemented them have wanted them to have to boost spending and inflation," he said.

"It may not even result in the desired effect if it was done. We can't say for sure whether it could or could not happen, it may not even be legal to do it. Certainly he wants it done but I'm not sure if it would be a good thing for the economy if it did happen."

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Negative interest rates have “adverse consequences which we do not fully understand,” Jamie Dimon, CEO of J.P. Morgan Chase, told CNBC-TV18 on Monday.
jamie dimon, negative, rates, permanent
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2019-00-22
Tuesday, 22 October 2019 10:00 AM
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