Negative rates set to cause significant market distortions - CFA UK

Heightened risk on the horizon

David Brenchley
clock • 3 min read

Investors need to be aware of heightened liquidity risk, leverage and credit risk as an extended period of negative interest rates threatens to force many to chase returns, CFA UK has warned.

The economic downturn caused by Covid-19 "could trigger an historically unprecedented shift to negative rates in the UK", CFA UK claimed, with the Bank of England actively considering lowering Bank Rate even further than its current 0.1% level. Elsewhere around the world, the assumption that negative and ultra-low interest rates would be transitory seem likely to be proven incorrect. Should this environment prevail for several years, this "could have a deeper, broader and longer-lasting impact than before, due to the Covid-19 pandemic", CFA UK said. CFA UK chief executive Will Goodhar...

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