As Rates Race to Zero, Printing Presses Gear Up

Antonia Oprita,
CNBC
Monday, Dec 15, 2008

When the Federal Reserve policymakers decide on interest rates Tuesday, investors will probably look one step beyond their decision, to gauge how much money will the Fed be willing to print once it is out of rate ammunition.

Rates won't likely hit zero Tuesday, but this could be unavoidable in the near future, according to strategists and market experts.

Unemployment is likely to surge after more job cuts have been announced by banks and the U.S. auto industry teetering on the brink of collapse. The housing market is likely to take another hit as more people lose their jobs, and consumption will plummet further.

"Rates will fall close to zero. Everywhere," Hugh Hendry, chief investment officer and partner, Eclectica, told CNBC.com. "The central banks will be forced to take them to zero because of the widespread disruption in society, for job losses."

(ARTICLE CONTINUES BELOW)

And nations may have to let them stay there for a long time, while finding new ways of easing policy even further.

"It's a typical race to the bottom," Ronald Stoeferle, equities analyst, Erste Bank, told CNBC.com. "But it's probably too late for this. In the current situation, I think we have to wait for this whole drama to unfold."

Full article here