Fed funds futures market sees negative rates by next April

On Friday, the fed funds futures market priced in negative rates of about half a basis point in April 2021.The U.S. central bank slashed the federal funds rate to near zero in March and has launched numerous programs aimed at boosting liquidity and stabilizing financial markets as the U.S. economy reeled from the coronavirus pandemic.Not necessarily. Futures indicate market expectations, but those can change. Futures markets are also highly technical.

“If negative interest rates will kill your business, maybe you’re in the business of lending money, I can see how you want to have some insurance against negative interest rates. And this is how they want do it, through the futures market,” he added.Central banks try to control interest rates using monetary policy, although supply-and-demand conditions in the market give investors influence.

There are limits as to how deep central banks can push rates into negative territory. Investors can avoid being charged negative rates on deposits by choosing to hold cash instead.Negative rates compress the margin that financial institutions can earn from lending. If rates stay negative for long, financial institutions could stop lending, hurting consumers and businesses and eventually damaging the economy.

The non-partisan Congressional Budget Office said last month it expects the U.S. federal deficit to nearly quadruple to a record $3.7 trillion this fiscal year, as the country combats the effects of the coronavirus outbreak.

Source: News Formal (newsformal.com)

globebusiness Positive outlook. Mark my words kaos is coming.

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