BLANKFEIN: Negative interest rates aren’t the ‘new normal’

Gary Cohn Lloyd Blankfein
Goldman Sachs COO Gary Cohn and CEO Lloyd Blankfein. Goldman Sachs

Goldman Sachs CEO Lloyd Blankfein just released his annual letter to shareholders — and he’s pretty optimistic about the global economy.

Blankfein, who cosigned the letter with COO Gary Cohn, pointed to strong US employment levels, increasing signs of moderate inflation, and a stabilizing stock market as positive indicators for the economy.

He also said he expects China’s growth rate to remain “substantial.”

One point Blankfein stressed was that negative interest rates in some parts of the world are likely not here to stay.

Here’s what he wrote (emphasis ours):

While we must consistently try to “see around corners” to anticipate problems, we also see plenty of reasons for optimism. We see the U.S. nearing full employment, signs of modest inflation and some stabilisation in equity and commodity markets. We don’t see how a world of zero or negative interest rates could possibly be the “new normal.” Moreover, we view China’s slower rate of economic growth as still substantial, particularly given that it is now the world’s second-largest economy. We see room for continued fiscal policy expansion in some economies, and options for monetary policy if meaningful growth proves elusive.

Both the euro zone and Japan have introduced negative interest rates in recent months.

European Central Bank head Mario Draghi on Thursday said he would do “whatever is needed” to lift Europe’s dangerously low inflation.

“We can’t forecast every outcome, and we expect the near-term environment to prove challenging,” Blankfein’s letter concluded. “Yet we find ourselves generally optimistic about the longer term.”

JPMorgan CEO Jamie Dimon on Wednesday released his annual shareholder letter, which was a little more gloomy.

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