1 Negative interest rates as the new normal (Nouriel
Roubini in The Guardian) Monetary policy has become increasingly unconventional
in the last six years, with central banks implementing zero-interest-rate
policies, quantitative easing, credit easing, forward guidance, and unlimited
exchange-rate intervention. But now we have come to the most unconventional
policy tool of them all: negative nominal interest rates.
Such rates currently prevail in the eurozone,
Switzerland, Denmark, and Sweden. And it is not just short-term policy rates
that are now negative in nominal terms: about $3tn of assets in Europe and
Japan, at maturities as long as 10 years (in the case of Swiss government
bonds), now have negative interest rates.
Beyond retail savers, banks that are holding cash in
excess of required reserves have no choice but to accept the negative interest
rates that central banks impose. Many long-term investors, like insurance
companies and pension funds, have no alternative, as they are required to hold
safer bonds.
Over time, of course, negative nominal and real
returns may lead savers to save less and spend more. And that is precisely the
goal of negative interest rates: in a world where supply outstrips demand and
too much saving chases too few productive investments, the equilibrium interest
rate is low, if not negative. Indeed, if the advanced economies were to suffer
from secular stagnation, a world with negative interest rates on both short-
and long-term bonds could become the new normal.
To avoid that, central banks and fiscal authorities
need to pursue policies to jump-start growth and induce positive inflation.
Paradoxically, that implies a period of negative interest rates to induce
savers to save less and spend more. But it also requires fiscal stimulus,
especially public investment in productive infrastructure projects, which yield
higher returns than the bonds used to finance them.
2 Ukraine ups interest rate to 30% (BBC) Ukraine's
central bank has sharply raised interest rates from 19.5% to 30% in an effort
to curb inflation and prop up its beleaguered currency. It comes as the
government in Kiev is seeking a $17.5bn assistance programme from the
International Monetary Fund (IMF).
Inflation is expected to hit at least 26% this year
and the hryvnia has tumbled against the dollar. The currency has lost 80% of
its value since last April, when pro-Russian separatists took up arms in the
country's eastern Donetsk and Luhansk regions, a month after Russia annexed
Ukraine's southern Crimea peninsula.
The conflict has taken its toll on Ukraine's
economy, which is forecast to shrink by 5.5% in 2015. The interest rate
increase is the second in two months, after the central bank raised the rate
from 14% in February.
Ukraine's parliament has approved a package of
reforms that could determine whether it will avoid economic meltdown in the
coming weeks. They include changes to the tax and energy laws and the
government's budget. The passing of the reform package was a condition for the
IMF rescue package.
3 Ikea furniture to charge mobiles wirelessly (Amy
Graff in San Francisco Chronicle) Swedish furniture maker Ikea is introducing furniture
with wireless devices that charge your phone. The line of tables, desks and
lamps was unveiled in Barcelona, and will arrive in North America stores on
April 15.
The furniture items, which require a power source,
charge wirelessly through a small, discreet charge pad. The pads will also be
sold separately (for about $33) to add onto existing Ikea pieces.
“People hate cable mess. They worry about not
finding the charger and running out of power,” Jeanette Skjelmose, Ikea’s
business area manager for lighting and wireless charging, told The Wall Street
Journal. Apple lovers: Don’t get too excited. The charging pads are compatible
with the Samsung Galaxy and Google Nexus 6, among a few others. Ikea’s new line
won’t give your iPhone a boost.
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