The stock markets are preparing for an up-movement with the expected reduction in European rates on Thursday the 10th.
Looser monetary policy usually sparks a stock market uptrend but in the long term it does the opposite, according to J.P. Morgan Chase analysts.
J.P. Morgan in a new report out this week, explained how major economies with negative interest rates have suffered from stock market losses. The report address Japan with 6.7% stock market loss, Eurozone equites are down 4.6% and Switzerland market stock shows 9% loss.
“NIRP (negative interest rates policy) has been counterproductive for equities so far where it was put in place, in Japan, the Eurozone, Sweden, and Switzerland. We are a bit concerned about how NIRP is negatively impacting the banks and we think the banks should rather be helped to lead to better economic growth going forward,” said Emmanuel Cau, equity strategist at J.P. Morgan.
Low interest rates aim to make lending cheaper and by so to encourage investing and consumer purchasing. European central bank expects to see inflation rate rise to 2% as a result of low rates, Inflation rate is currently stands at negative 0.2%.
Although central banks officials believe in negative interest rates to boost the economy, some economist say the use of negative rates hurt banks profitability. When banks showing less profitably, the economy suffers a slowdown and as a result the stock market in the long term drops.
In the end, economies with negative rates will prove success if inflation rate will rise.
Looser monetary policy usually sparks a stock market uptrend but in the long term it does the opposite, according to J.P. Morgan Chase analysts.
J.P. Morgan in a new report out this week, explained how major economies with negative interest rates have suffered from stock market losses. The report address Japan with 6.7% stock market loss, Eurozone equites are down 4.6% and Switzerland market stock shows 9% loss.
“NIRP (negative interest rates policy) has been counterproductive for equities so far where it was put in place, in Japan, the Eurozone, Sweden, and Switzerland. We are a bit concerned about how NIRP is negatively impacting the banks and we think the banks should rather be helped to lead to better economic growth going forward,” said Emmanuel Cau, equity strategist at J.P. Morgan.
Low interest rates aim to make lending cheaper and by so to encourage investing and consumer purchasing. European central bank expects to see inflation rate rise to 2% as a result of low rates, Inflation rate is currently stands at negative 0.2%.
Although central banks officials believe in negative interest rates to boost the economy, some economist say the use of negative rates hurt banks profitability. When banks showing less profitably, the economy suffers a slowdown and as a result the stock market in the long term drops.
In the end, economies with negative rates will prove success if inflation rate will rise.
