Yellen: "Negative interest rates not excluded"

According to Janet Yellen of the U.S. central bank, negative interest rates cannot be ruled out, should the economic situation in the United States develop unfavourably in the future. But before that happens, according to the chairman of the Federal Reserve, more research needs to be done into the effects of negative interest rates. Yellen responded to several questions from U.S. Congressman Brad Sherman on Thursday.

The words and actions of central bankers have been followed with increasing attention by investors in recent years, as central banks play an increasingly important role in supporting the economy. At the end of last year, the Federal Reserve was still planning to gradually implement a number of interest rate hikes, but due to a sudden correction in global stock markets and new concerns about the European banking sector, the US central bank decided not to raise interest rates again.

Negative interest rates not ruled out

Fewer and fewer investors are convinced that the Federal Reserve will raise interest rates this year, as this will have very negative consequences for the global economy. Higher dollar interest rates will slow down economic growth and will further increase the value of the dollar. The latter is unfavourable for the export position of the United States and for companies in emerging economies that have borrowed in dollars.

Yellen said that she still intends to raise interest rates incrementally, but the fact that she is leaving the door to negative rates ajar is proof enough that she is not entirely sure of her case. We will not be surprised if the US central bank will lower interest rates again in the event of disappointing growth.

In Europe and Japan, central banks have been experimenting with negative interest rates to stimulate the economy for some time, but the policy is meeting with increasing resistance in both cases. Due to the extremely low interest rates, pension funds and insurers are under pressure, while savers are confronted with an increasingly lower or even negative interest rate on savings.

Buying gold is becoming more and more interesting

Due to extremely low interest rates, the yield on government bonds has fallen significantly. Even on loans with a term of thirty years, you get almost no interest anymore. With a negative yield on government bonds, gold is becoming increasingly attractive as a safe haven. Investing in physical gold has also become very easy for private individuals and retail investors.

According to the World Gold Council In a negative interest rate environment, it is justified to hold twice as much gold as normal in the portfolio.

Janet Yellen (Federal Reserve) does not want to rule out negative interest rates yet