The issues surrounding interest rates have taken centre stage among financial circles over the past few months, and one of the most interesting yet controversial topics has been that of negative interest rates. Many countries in the world now have negative interest rates, and now it is being discussed whether it could be ultimately implemented in other countries. Many financial experts have spoken about the possibility of negative interest rates and zero interest rates in the United States, but it still seems like a distant possibility. However, the biggest banks in the world are not known for waiting for such disruptions to wait.
They make preparations to such risks early and hence ensure that they are not caught unawares when it eventually comes along. JP Morgan is apparently preparing itself for the risks that could be brought on to the banking sector if zero interest rates are eventually introduced in the United States. Speaking at a conference in New York, the influential CEO of JP Morgan said, “I don’t think we’ll have zero rates in the U.S., but we’re thinking about how to be prepared for it, just in the normal course of risk management.” While he does say that it is not going to happen in the United States, it is telling that the bank is still preparing for the risks. That being said, it is important to note that the interest rates in the United States are dropping and back in 2018, Dimon had stated that he believes that the rates would eventually rise.
On the other hand, the yields from 10-year treasury bonds have declined remarkably in recent times, and on Tuesday it dived to 1.695. At the beginning of the year, the same figure stood at 2.68%, and experts believe that the global economic slowdown is primarily responsible for the significant drop in yields. Talking about the relative merits and demerits of zero interest rates, Dimon stated that while it is true that some businesses can remain totally unaffected by such a move, it can be quite different for other businesses. For some businesses, zero interest rates can have a highly damaging effect on the eventual bottom line, and that is not something that is going to be entirely palatable to the American business community.