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The FED Will Keep Rates Low For a Long Time After Coronavirus Goes Away

Posted Monday, April 13, 2020 by
Skerdian Meta • 1 min read

Central banks across the globe have taken extremely drastic measures, cutting interest rates several times in more than a month, bringing them near 0%. While other central banks such as the ECB, the SNB or the Bank of Japan already have negative interest rates.

Besides them, the governments have gone mental as well, throwing trillions of dollars into the global economy. As long as coronavirus remains, the measures will be drastic, but I think that that will last for much longer. FED’s Clarida made some comments on the rates, showing that it will take a really long time to start thinking about hiking them again.

Comments by FED Vice President, Richard Clarida

  • Will keep rates near zero until the economy is back on track
  • Fed is ensuring credit is flowing to the US economy
  • Any talk of a rate increase is “a long way down the road”
  • Confident that emergency measures can be scaled back at appropriate time
  • We have the tools to keep the economy out of deflation
  • Central bank needs discretion in a moment like this to respond to the crisis

When this is all said and done, which no one knows when that will be, expect the FED measures to weigh on the US dollar for an extended period of time. Although, all other central banks and governments have taken similar measures, so I don’t know which currency will be good to buy, probably besides safe havens.

It could likely take the Fed a few years to scale back on their recent actions but when they do so in a meaningful way to set up rate hikes once again, we could potentially see a repeat of the 2013-15 period where the only trade was to buy the dollar.
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