IMF Advised Central Banks

The IMF advised central banks. The International Monetary Fund (IMF) submitted a report on negative interest rates.

The International Monetary Fund (IMF) published a report on negative interest rates. The IMF said central banks should not reject the negative interest rate policy and keep it as part of their toolkit even if they are unlikely to use it. Reminding that many central banks have implemented negative interest rate policy starting from 2012, the report stated that this policy continues to be a politically controversial issue as it raises many questions and is partially misunderstood. In the report, it was emphasized that the negative interest rate policy came to the fore again in the crisis caused by the new type of coronavirus epidemic, and it was explained that the transition to the negative interest rate policy was effective in money market interests, long-term returns and bank rates. In the report, which pointed out that the negative interest rate policy contributed significantly to the decrease in long-term returns, it was noted that the bank lending volumes generally increased and the bank profits did not deteriorate significantly until this time. The following statements were included in the IMF report: "Negative interest rate policy likely supported growth and inflation. The effects of negative interest rate policy on inflation and output can be compared to traditional rate cuts or other unconventional monetary policies. However, since there is no evidence that the negative interest rates applied so far have triggered these problematic effects, there may be a freedom to push interest rates further negatively." In the IMF report, while it was stated that some central banks adopt a negative interest rate policy while others resist it may be related to institutional and country characteristics, the following words were added: "Also, the evidence so far suggests that central banks should not ignore negative interest rate policy and keep it as part of their toolkit even if they are unlikely to use it." The report also warned that given the low neutral real interest rates, many central banks may sooner or later have to consider a negative interest rate policy, although it has negative side effects.     Source: Bloomberg HT