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Uber bears see ‘deeply negative’ US interest rates

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Uber bears see ‘deeply negative’ US interest rates

September 25
00:00 2015

Rather than hiking rates and tightening monetary policy, two of the City of London’s most renowned pessimists believe the U.S. Federal Reserve will soon cut them into “deeply” negative territory. Societe Generale’s Albert Edwards and Bob Janjuah, senior independent client adviser at Nomura, are two notoriously bearish – but widely-followed – strategists and made the conclusion over that very British tradition — a cup of tea.

“I enjoyed afternoon tea with my fellow strategist Bob Janjuah of Nomura,” Edwards said in his latest note published on Thursday. “The next U.S. recession will probably arrive a lot sooner than most investors expect and will likely see more desperate monetary experimentation from the Fed. Bob and I thought that this time we would see deeply negative interest rates in the U.S. (and Europe).”

The negative rate would only apply to banks but the lenders should in theory pass on this disincentive to save to its customers by trimming their rates. Such a measure would likely come alongside another bout of bond–buying, according to Edwards, a measure which has also been touted from economists like Larry Summers, the former U.S. Treasury Secretary.

Fears over global growth was credited by the Fed as it decided to hold off on what would have been its first rate hike in seven years last week. While not a complete surprise, the uncertainty caused “risk-off” sentiment throughout global markets. Just a day later, Bank of England Chief Economist Andy Haldane entertained the idea at that the U.K. central bank could may have to cut rates rather than raise them because of deflationary fears and concerns over emerging markets.