The use of tiered interest rates in Europe and Japan has given central banks a little more scope to cut interest rates without doing serious damage to the banking sector. But tiering has arguably also reduced the effectiveness of policy loosening while doing nothing to counter the adverse effects of low long-term yields. The latest foray further into uncharted territory by the ECB and SNB has served mainly to highlight that central banks are reaching their limits. And the possibility of tiering does not change our view that the US Fed is very unlikely to cut rates into negative territory over the next few years.
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