(Bloomberg) --
A trio of bankers warned that negative interest rates could hinder economic growth in the U.S. even as President Donald Trump continues to urge policy makers to cut rates to less than zero.
Executives from Deutsche Bank AG and Morgan Stanley said Thursday that negative rates haven’t stimulated growth around the world -- comments they made just minutes before Trump tweeted that the Federal Reserve would be “derelict in its duties” if it doesn’t lower interest rates further. Companies and consumers in countries such as Germany are being paid to borrow money, Trump said.
“The negative-rate experiment, if you will, around the world has effectively not worked,” Morgan Stanley Chief Financial Officer Jon Pruzan said at a conference in New York hosted by the Financial Times. “So we’re hoping we’re not going to mimic a policy that hasn’t worked.”
Citizens Financial Group Inc. Chief Executive Officer Bruce Van Saun said on the panel that while his bank is preparing for persistently low rates in the U.S., he doesn’t believe policy makers will cut them to less than zero. Banks will begin building out other sources of fee income, such as advisory and wealth-management services, to counter the blow of low rates, he said.
Central banks across Europe and Asia have moved to negative interest rates in the past decade, actions that squeeze banks’ margins because they’re forced to pay for the excess reserves they hold in those institutions. Many households and small businesses pull money out of the banking system because they’d rather hold onto it than pay a lender to store the funds.
“Speaking from the eye of the storm in Europe, I can only echo them,” Christiana Riley, head of Deutsche Bank’s U.S. operations, said of her fellow panelists. “Please don’t do this, please don’t do it, it defies all logic.”
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