Negative might be negative
- In a move predicted by no one, the Bank of Japan has taken rates negative (sort of. It is a complex structure). Rates cannot actually go negative – the zero bound holds – so only those forced to hold deposits will pay negative rates.
- This means that the negative rate should (in economic terms) be thought of as a discriminatory tax (affecting large depositors and banks). Small depositors have the option of holding physical cash if they wish so are unlikely to face negative rates.
- US GDP is due for the fourth quarter, with inventories expected to weigh on activity. The Fed has already hinted that it is prepared to look through such things (as is only right – the trend, not individual data points are what matter).
- Euro area CPI inflation is scheduled, with the core rate likely to be around 1%. The US Chicago PMI of manufacturing sentiment is due, but likely to be overshadowed by the GDP figures.