Former Fed Chairman Greenspan: ‘Only matter of time’ until US sees negative interest rates
Former Federal Reserve Chairman Alan Greenspan said Wednesday that it won’t be long before U.S. Treasury bonds trade at negative interest rates, matching sub-zero levels seen across the globe.
“You’re seeing it pretty much throughout the world. It’s only a matter of time before it’s more in the United States,” Greenspan said Wednesday in an interview on CNBC’s “Squawk on the Street.”
“We’re so used to the idea that we don’t have negative interest rates, but if you get a significant change in the attitude of the population, they look for coupon.”
Greenspan’s comments come amid growing economic and political pressure on the Fed to cut interest rates. The bank’s policymaking arm, the Federal Open Markets Committee (FOMC), faces a crucial decision in September on whether to cut interest rates by 0.25 percentage points, issue a larger 0.5-percentage point cut, or keep rates unchanged.
While the U.S. still enjoys moderate growth, unemployment near record lows and solid consumer spending, key indicators of future conditions have slumped as the global economy slows.
As growth in Europe and Asia slows to near-retractionary levels, interest rates for German, French, Japanese and Belgian bonds have slumped into negative ranges as investors seek safe havens, according to CNBC.
President Trump has pressured the Fed to “match” negative European rates with massive cuts, even though the U.S. economy is notably stronger than those of other global powers.
The Fed cut interest rates in July as a hedge against deeper economic trouble, and Powell said in a speech earlier this month that the bank is prepared to do so again “to sustain the expansion.” A sharp escalation in trade tensions, dismal industrial data and the rising uncertainty surrounding Brexit have soured the economic outlook.