Several analysts point out that there is a possibility growing that FED might follow European Central Bank (ECB) and Bank of Japan (BOJ) policymakers in introducing negative rates on excess reserve. Their argument is that if current turmoil turns out bigger and US economy plunge into recession once more FED, doesn't have many tools in the box, negative rates remain a prominent option. Moreover negative rates is not a taboo at FED anymore, like it used to be 7 years back.

Several FED policymakers have commented on the negative rates as a toolkit in FED. In last September FED chair Janet Yellen commented, negative rates are possible but not probable in the near future. You can read more on that in Bloomberg.

Market is now pricing that a rate cut from FED is very much possible.

We, at FxWirePro, expect a crisis down the line and equity selloffs, however we don't expect FED to introduce negative rates. There could be political hurdle for that. In US it would be impossible to pass negative rates to consumers, so scope would be limited before such rates hurt banks' profitability. It would prompt more risk taking and reckless lending. A negative rates would also de-anchor treasury yields to the downside.

Given the sheer size of US treasuries globally, negative rate would have much bigger implications than that of ECB and BOJ.

Instead FED's quantitative easing would be the tool to deploy again. Compared to BOJ and SNB, FED's balance sheet is much smaller as a percentage of GDP and secondary market for treasuries much deeper and liquid than in Europe.

As of now, we don't expect FED to deploy any tools, but in the near future, even if FED acts, we don't see a negative rates coming.