This Is What Yellen Said About Negative Rates Coming To The US

Tyler Durden's picture

As reported earlier, the biggest stunner bar none in today's FOMC announcement, was the emergence of a negative interest rate dot in the Fed's projections. It was unclear who drew that (perhaps Kocherlakota, perhaps not)...

... but the author is ultimately irrelevant: what is very relevant is the "inception" of NIRP in the heads of the FOMC members, which came at a time just when everyone was supposedly gearing up to boost rates by a meager 25 bps, further raising questions if the US economy is already in recession (spoiler alert: yes).

Of course, this should come as no surprise to our readers: just in January we wrote "Get Ready For Negative Interest Rates In The US", but for the Fed to admit this possibility just when it was widely expected to at least signal a rebound in the economy with the tiniest of rate hikes, or at worst a hawkish statement, was truly a shock.

So besides a red dot on the dot plot, what else do we have to go on? Not much, though luckily one reporter did ask Yellen what the NIRP dot signaled.  This is what she said:

Let me be clear that negative interest rates was not something that we considered very seriously at all today. It was not one of our main policy options

The proverbial "we did not seriously consider it today" fluff. Remember when the SNB promised the Euro-Franc peg was safe and sound "today", and the very next day it crushed countless FX traders who were long the EURCHF? Kinda like that.

And yet...

I don’t expect that we’re going to be in a path of providing additional accommodation. But if the outlook were to change in a way that most of my colleagues and I do not expect, and we found ourselves with a weak economy that needed additional stimulus, we would look at all of our available tools. And that would be something that we would evaluate in that kind of context.

And there you have it: not if but when the inevitable inventory accumulation spills over and results in the next recession, we now know the simple choice that is facing the Fed: QE 4 (or 10 if the Fed goes "Windows") or NIRP.

As for hiking rates, well we leave it to Ben Bernanke who said it best earlier this year: "No Rate Normalization During My Lifetime"

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
nagan's picture

Congrats Janet Yellen.. I lost all faith in you and free markets.

t0mmyBerg's picture

Welcome to the party.  You are a little late, most of the canapes and shrimp have already been eaten.

MANvsMACHINE's picture


Ham-bone's picture

NIRP is the next step as ZIRP loses it's effectiveness.

And it's everything to do with declining core population growth in the US and outright declining core populations globally...when there are fewer buyers, the logical step is lower rates to get them to leverage up...and when that doesn't work, pay them to leverage up.

Divided States of America's picture

From considering raising interest rates to having negative interest rates...sounds like to me that Yellen is pulling a Gartman.

HardlyZero's picture

Yellen is getting a witch treatment by getting sucked into a deflationary spiral.


The "dot chart" looks like a Rorschach test...for the public.

greenskeeper carl's picture

better get going with that cash ban quick, I hear NIRP is much more efective when people don't have much choice

EnglishMajor's picture

After you have crossed the rubicon, you have to count backwards.

MalteseFalcon's picture

Change will have to be forced on the system from the outside.

Gaius Frakkin' Baltar's picture

China almost scared the fucking joo right out of them with the bond thing. It mostly hinges on THEIR market, as wallyworld street has proven itself to be largely irrelevant.

Sages wife's picture

"...all of our available tools."?

Richard Chesler's picture

Translation for those who don't understand sophisticated fed speech,



Four chan's picture

to a bank, its product is money aka debt. it is poison like anyone having too much debt or business to have too much inventory. nirp is both a theft mechanism against savers and a weak way to force people to get the poison of the feds debt out of their system and into the peoples hands where it can be silently stolen through inflation aka dealuation aka printing. THE FED IS FUCKING EVIL AND HAS BEEN FOR 100 YEARS!!

VinceFostersGhost's picture




The Fed is nothing more than a group of old fat crony bankers stealing your grandkids money.


Nice guys.....huh?

Antifaschistische's picture

think about how negative interest rates really work.  I borrow $100 from you you back $99 in a year...and my debt is paid off.

Think of what that truly is.  It's not negative interest is DEBT FORGIVENESS, and that's what it should be called.

The world's going to get interesting.

Bemused Observer's picture

Do you actually think you'll get negative rates on YOUR debt?


Your credit card rates will go UP, not down. And no one will EVER pay you to buy a home. Those negative rates are for the big important borrowers, not you.

Where do you think the money for those negative rates will come from? Someone will make out like a bandit, it just won't be you.

Antifaschistische's picture

duh...of course not.   Only the Treasury, insider hedge funds and mega corps will get that rate.  It was an EXAMPLE!

Bendromeda Strain's picture

think about how negative interest rates really work.  I borrow $100 from you you back $99 in a year...and my debt is paid off.

Hah! You forgot to mention in your scenario that YOU are a bank. I put $100 in savings (unsecured loan) and in a year I see a balance of $99.

MY borrowing (as noted above) still incurs a positive interest rate. Are you currently getting mortgages or car loans at .25%? Didn't think so...

Grandad Grumps's picture


If they actually want negative rates to stimulate the economy (and by stimulate I mean hyperinflate) then they would give consumers negative rates.

Somehow they want us to believe that by giving banks negative rates (including charging people to save money at banks) that the banks will show some kind of restraint that consumers would not.

What will happen is the so called banks (who are actually hedge funds) will lever up, buy everything of value and crush the people further into debt servitude.

That will be their actions, so clearly that is their plan.

They have had many opportunities to turn back and have declined to do so. It is not weakness or incompetence. It is corruption and evil.

NoVa's picture

FY 2016 and 2017 look pretty sexy to me - - - 

Enki Anu's picture

Yellen is a nobody, just a mouthpiece for the Khazarian Bankstre Warlords who don't want to give you anything anymore for holding their fiat but would happily charge you 29% for your credit card minimum payment. And soon they will charge you fee's for banking with them.

overmedicatedundersexed's picture

a little majic and tisssue paper is worth your labor and production, now who controls the tissue paper, well there's the rub. one religion has had all the fed chairs for over 2 decades is just well luck er majic.

StupidEarthlings's picture



So..I can assume that..

1. They REALLY aren't  going to raise rates.  (As many here have said in the past..although reading several 'Tyler articles' almost might not have have gotten that same vibe..'almost' as though  the Tyler were convinced for a hot sec there..could be just me though..)  ;)

2. Negative rates  ARE coming to a US of A near you.

Oldwood's picture

We are not spending enough.

Most have nothing to spend.

So they will beat us with whips of negative return on our wealth (such as it is) while incentivizing even more debt.


even if we have nothing to spend and nothing to buy. We will be asked to borrow, if it is only for paper to burn in the backyard pit. Money is no longer important. The currency of the day is DEBT.

Think about it!

It will cost us to save and they will PAY us to spend what we don't have. The world has gone mad.

ersatz007's picture

They will "pay" us in funny money.

newbie vampire's picture


We already have negative interest rates.  Anyone who doesn't see inflation, haven't been paying bills.  The costs of essentials, food, heating, college education, healthcare etc keeps going up.  

Basically, every working person is on the breadline.

ZIRP or NIRP does not help anyone except the 1%.

Who is driving up the cost of housing, stocks etc  ?   Investors.   The banksters' favorite customers.   They get the best borrowing rates because they don't really need to borrow.   As compared to the person who really needs that loan for a mortgage.   The people who need to borrow are a greater financial risk to the banksters than the investors.

FreeNewEnergy's picture

Shit, I wanted to just chill and numb out on a joint or three and football, but you had to mention the cost of living.

In case you haven't noticed, or maybe you live in a city, in which case, too bad, but everything is getting cheaper out in the sticks. Firewood, fresh vegetables, honey, labor, everything is cheap and getting cheaper, even fucking gas! (2.31 today, cash price, and this is NY state).

The deflationary supervortex™ (yeah, I'm calling dibs on that) is about to suck out every last breath of normalcy bias left in the world, so, I suggest sucking off the teats of public employees. Do their yard work, fix their faucets, etc. After all, you already paid for it, taxpayer.

Anecdotal comment: Bought about five pounds of fresh, homegrown tomatoes for $3.00 the other day. How's that inflation treating you?

Bullionaire's picture

Enjoy your football teevee programming.

847328_3527's picture

It's more biflationary and hits certain sectors at certain times. Right now most prices are plunging due to massive oversupply and very low demand. People are broke so zero demand an dinventories are huuuuuuuuuuuuuuge. Clothes, even food is stacked up with no place to go and zero consumers to buy. Wages going no where and STEM grads are also getting reamed. Only bankers and politicians are golden.


The things they can force you to buy [like Obamacare] are skyrocketing.


Forsure, savers are getting the dry sodomy treatment by the Fed and Wall Street bankers.

Son of Loki's picture

That's one reason I like Trump. He is NOT a career poltician; he actually has a real job and is not born and bred inside of the DC Loop. Who knows but I feel he understands the plight of the American Middle Class better then any of these other professional polticians. He has tons of common sense. By far and away he is better then any left-wing democrat who simply want huuuuuuuuge tax increase to pay for their massive gubmint expansions.


I don't know enough yet about Fiorino but Bush seems totally disconnected from America's Middle Class along the lines of Boner and Mitch McConnell.

Bananamerican's picture

Trump is gonna break your heart Loki

Hohum's picture

And a nice 300M from his dad, Fred.

thinkmoretalkless's picture

I see a portion of Trumps support coming from many who want to be a part of a campaign that rubs the establishment and their groupies noses in it. They like to watch someone not cowed into admitting they misspoke or however else they can dilute their apology. They revel in Trumps Immunity to their weapon of toxic slime and actually shoots back. I admit to enjoying the ride in the backseat as Trump runs over the elites standing in the street shouting HALT! I only wonder if Trump is a victim of his own success. I'm not convinced he is in it to win it and for that I can't blame him. If so be has a problem with an exit strategy. It must be something dramatic and punishing to his detractors.

2handband's picture

Trump is a carefully calculated and meticulously timed theatrical act. He's not running roughshod over the elites; he's doing their bidding. It's Obama all over again. He's telling the masses what they wanna hear.

Oldwood's picture

The emotional support is always the easiest to reach compared to rational support which requires hard facts and analysis. The problem is that emotion support is not secure, it can change in a heartbeat.

I support Trump's attack on political correctness and some of his stands, but for me that doesn't translate into a vote. I hope that he is the icebreaker that clears a path for a rational player who can truly represent MY conservative perspectives.

I know.....I'm suffering from irrational hope.

sleigher's picture

Your hope is audacious.  ;)

Chuck Walla's picture

It's not the pols don't understand, it's that they just don't care. It doesn't pay as well.


DollarMenu's picture

She's just as ready to send soneone else's kids to die in a banker war as any of the others.

You do not get your name on the ballot without pre-approval of the ballot controllers.

2handband's picture

I live in rural MN and stuff is expensive as fuck. Grocery stores bone you here because it's 30 miles to the next one. 

FreedomGuy's picture

It was always a bluff. They cannot tell whether or not they are going to raise rates until they get to the moment. They signaled earlier that they know they SHOULD but that is a bluff. It is trying to look like an honest Keynesian who will go countercyclical...only they never do. They always go for the balloon-bubble-boom. 

Homes are super sensitive and it brings out those asshole home flippers everywhere. They are back in force. There are two types: 1. The kind who buys a home in a hot or accelerating area and actually improves it, increases the market value and sells at a profit. This type is not so bad. 2. The guy who finds and underpriced home, buys it and puts it back on the market two weeks later at 25% higher price. I hate these guys. They actually drive up home prices with an artificial demand. 

I remember in the last boom-bust reading about Vegas waitresses who had 13 homes. There have to be 12 other actual people who want to either live in the home or own it as a vacation home. Apart from either, it is a fake demand and fake pricing signal. It drives up the prices for people who actually need a place to live or have some organic need for another home. 

I know that free marketers can make an argument about how this works and I get it, but it is still not long term organic demand. 

As one who is in the midst of selling his home to more to another area it irritates me. Yes, I do get appreciation on the selling end but do not really get ahead when I have to replace it at 20% higher, as well. 

At the core of these things, you will find the Fed-government-central planners. 

TeethVillage88s's picture

Well the Latin Americans, the Chinese, the Europeans seem dumb in this regard... "Push Forward Men" on toward NIRP.


- Not that Latin Americans or Chinese have NIRP, but the proven propaganda of WWI Era USA and Nazi Germany is a proven Technique, successful tools.

Charles Wilson's picture

A most interesting Set of Rules. As the Order states, Interest Rates cannot go negative since it would mean you are paying Janet to hold your money when you could put it under your mattress and lose nothing.

So wass'up?:


1.The purpose of the NIRP is to FORCE the money into the Economy to stimulate the Multiplier.

2. When first considering the idea, it's "Simply Horrible! I've got to put my free money into the hands of those...those PROLES!"

3. Ahhh, but sanity takes over.  Nobody else is putting THEIR money into the Drubs grimey fingers so there is something else going on.

4. "We'll PAY Janet and her bosses and keep our cut because, absent other actions, we'll still have more free money left over at the end (*Shudder*) compared to what we will have left otherwise.


The game is not over because someone is still geting trainloads of free money (...and shiny metal commodities...), the WAR hasn't hit our shores yet and there's still a pipeline to "Our People".

Subject to change at a moment's notice but...GAME ON!!!



DanDaley's picture

... you could put it under your mattress and lose nothing.


This is why they want to ban/prohibit/outlaw cash, oh don't ya know. No more paper to stuff in that mattress.

Oldwood's picture

Is not negative rates a government default? 18 trillion dollars of debt that they likely will be getting paid to create.

In any sane world, any entity that is forced to borrow to make payments on their debt is in default. The fact that the banks can't afford to call the note says more about them than the debtor.

Corruption is default...the contract failed

chunga's picture

Take it a step further.

The IRS will still consider earned interest taxable even if it's at a negative rate.