Welcome to Thoughts of the Market.

I'm Andrew Sheets, Chief Cross Asset Strategy for Morgan Stanley.

Along with my colleagues bring you a variety of perspectives,

I'll be talking about trends across the global investment landscape and how we put those ideas together.

It's Friday, May 15th at 2 p.m. in London.

The idea of low interest rates is nothing new in the United States, but the idea of a negative rate is. This week

markets began to price expectations for the Federal Reserve to lower rates

further to levels below zero. A similar thing happened here in the United Kingdom. While

Central banks from Sweden to Switzerland to Japan to the Eurozone have all

implemented negative interest rates, the US and the UK never have. Is that about

to change? We don't think so.

To understand why I want to take a moment to explain negative rates and why we don't think

it's a particularly effective form of policy.

Negative interest rates are a bit like having a savings account that pays no interest but does have a monthly fee.

Such an account makes saving money a losing proposition and that's precisely the point. Native rates are meant to encourage

spending by making savings punitive, spending which in turn should help overall

growth. That's the theory, but for anyone following the economies of Europe or Japan over the last several years the challenges that we think the Federal Reserve and the Bank of England are well aware of.

One of those drawbacks is practical.

Negative rates can disrupt the plumbing of the financial system which was never designed for negative numbers.

But charging people to save money is also unsurprisingly

unpopular and banks in Europe and Japan have really struggled to pass these

costs along to their customers. As banks have been forced to eat these costs, they found

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