Rising sales of safes show how consumer trust can be jeopardised, writes Huw van Steenis…
Conventional thinking is that negative rates are just a natural continuation of quantitative easing, like dialling down the air conditioning. This, though, underestimates how financial intermediaries may actually respond. They erode banks’ margins. They give lenders an incentive to shrink, not grow. They encourage banks to seek out opportunities overseas rather than in their home markets. They also risk disruptions to bank funding. All go against the grain of the central banks’ desire to ease credit conditions and support financial stability.