Digital currencies pave way for deeply negative interest rates

  • This matters for investors, because if rates can be taken deeply negative it would shift the long-term outlook for interest rates and inflation.
  • The aim of deeply negative rates would be to stimulate the economy, creating a quicker recovery and allowing the central bank to raise rates again more quickly than if it was stuck at the lower bound for years, as the Fed was from 2008 to 2015.
  • Either way, interest rates matter for bond yields, and electronic money can give central banks more freedom with interest rates.
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