Are Low Global Interest Rates Backfiring? People Are Spending Less, Not More
Policymakers in Europe and Japan turned to negative rates as a tool to stimulate their struggling economies, but instead of negative rates encouraging people to spend more, people are clutching their dollars and spending less.
Consumers are saving at the highest levels since 1995 in Denmark, Switzerland and Sweden—three non-eurozone countries with negative rates—while consumers are also saving more in Germany and Japan, the Wall Street Journal reports. Economists point to a variety of other factors that could account for this strange outcome, such as low inflation, aging populations and poor communication on the part of central bankers.
Yet there is a growing suspicion that negative rates themselves are part of the problem—economists speculate that the US Federal Reserve in particular communicates fear over future growth, which could be scaring people into stockpiling cash in preparation for another recession. [WSJ]
