Bleakley Investment Officer Warns Against Negative Interest Rates
Peter Boockvar, chief investment officer and portfolio manager at Bleakley Advisory Group, asserts that negative interest rates will hurt banks and the overall economy.
The possibility of negative interest rates in the U.S. has increased as the Federal Reserve recently cut rates and left the door open for future cuts as well. Boockvar believes that introducing negative interest rates would greatly threaten the central bank as well.
"We don't want to cross the Rubicon of repeating the mistakes of the BOJ and the ECB — of damaging their banking system, killing their yield curve, and fracturing their entire financial system," said Boockvar.
The Bank of Japan and the European Central Bank have both introduced negative interest rates for long periods of time. Consequently both economies have displayed low GDP growth rates.
Negative interest rates means that individuals who lend their money to central banks are actually paying a fee for the security of the central bank. This would reduce lending to banks and decrease the liquid assets that central banks have to supply loans.
"You're killing your banks. And if you kill your banks, then you're destroying the transition mechanism of monetary policy, and you basically cut off a profitable way of loaning money to business," said Boockvar.