BlackRock chief executive Larry Fink has spoken out about the “worrying” trend of central banks to move to negative interest rates, saying they are punishing savers.
In a letter to shareholders, Fink says negative rates are having knock-on effects for savers, pushing them into riskier assets. He adds that not enough attention has been paid to the effects of negative interest rates.
“Investors today are facing tremendous uncertainty fuelled by slowing economic growth, technological disruption and social and geopolitical instability. Particularly worrying is the adoption of negative interest rates by central banks attempting to spark economic growth,” he says.
“Their actions are severely punishing the world’s savers and creating incentives to reach for yield, pushing investors into less liquid asset classes and increased levels of risk, with potentially dangerous financial and economic consequences.
“Not nearly enough attention has been paid to the toll these low rates — and now negative rates — are taking on the ability of investors to save and plan for the future.”
Fink adds that the implications of this are likely to be “profound” on economic growth, as those saving for retirement cut spending to reach their retirement goals.
“A monetary policy intended to spark growth, then, in fact, risks reducing consumer spending,” he adds.
His comments come after the Bank of Japan and the European Central Bank moved to negative interest rates, in a bid to stimulate lending from banks and boost growth and inflation.