... in this brave new world, how much lower can rates now go? According to an analysis published late on Tuesday by economists at JPMorgan Chase & Co., way, way lower. Having studied the lack of fallout in Switzerland, where the benchmark rate is minus 0.75 percent, Malcolm Barr, David Mackie and Bruce Kasman reckon the trick lies in a tiered system as already deployed by the Bank of Japan and in some places of Europe, whereby only a portion of reserves are subjected to negative rates.

On that basis, they estimate if the ECB just focused on reserves equivalent to 2 percent of gross domestic product it could slice the rate it charges on bank deposits to minus 4.5 percent. That compares with minus 0.3 percent today and the minus 0.7 percent JPMorgan says it could reach by the middle of this year.

The Bank of Japan's lower bound on a similar basis may be minus 3.45 percent, while Sweden's is likely minus 3.27 percent, the economists said. Should they also go negative, the Fed could cut to minus 1.3 percent and the Bank of England to minus 2.69 percent in JPMorgan's view, reflecting how the ratio of reserves to assets is higher in their economies than elsewhere.

Concentrating on 25 percent of reserves would allow the ECB to cut to minus 4.64 percent and the Fed to minus 0.78 percent. Making no change to the current regime would allow Draghi to lop to minus 1.36 percent, they said.

Easing the fall is that the JPMorgan economists bet that banks are unlikely to be able to pass on the cost of the policy to borrowers, reducing potential repercussions. They also see limited pressure on bank profits or for a need to stash cash.

So basically as long as it is a silly stage show, negative interest rates can "work". But see Fed's Janet Yellen: Not sure we can do negative rate; rate cut unlikely.

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