Title - QE and negative rates have side effects

Jane Foley, Senior FX Strategist for Rabobank, while talking to TipTV said Fed statement was slightly hawkish given the bank removed statement over international risks. Many in the markets called the Fed statement as slightly dovish since the bank also took note of economic slowdown. However, Foley believes June rate is on the card as rhetoric from Fed officials indicates many are telegraphing a rate hike and Fed’s plan to move rates in June would fail if there is a “catastrophy’ with respect to economic data.

Foley also squashed popular opinion which suggests Fed may prefer to stay on the sidelines closer to US election by stating the bank would act in September if there is a rise in wage inflation. Politics could be act as a reason for a delay in the rate hike if the economic data isn’t there, added Foley.

Foley agreed with DirtyEconomics slide which compared QE to steroids, stating the unconventional measures might result in long term issues. Negative rates could affect bank’s profitability and may actually hamper credit creation, noted Foley. Pressure is also mounting on Bank of Japan, said Foley, given many of the politicians is unwilling to support the move to uncharted territory. Mir added the zero interest rates have destroyed boom bust cycle, while Foley stressed on need for structural reforms, something ECB’s Draghi has been calling on for some time now.