Central banks in Europe and Japan have pushed short-term rates into negative terrain, meaning they are charging banks that leave money on deposit with them. Ms. Yellen, Chairwoman of the US Federal Reserve Bank, said she didn't think the Fed would need to do this, but it should be prepared if the economy sinks and such a step is needed. Prominent bond managers like PIMCO answered that they think negative interest rates won’t work. In his most recent book, „The Only Game in Town”, Mohamed A. El-Erian, Chief Economic Advisor Allianz SE, discusses the role of central banks. Here are his thoughts on what is happening.
