Illustration: Aïda Amer/Axios

The European Central Bank (ECB) is expected to push forward with deeper negative interest rates next month and the Fed looks to be considering implementing them in the U.S. should the current economic slowdown accelerate.

The big picture: There's growing evidence that the experimental policy designed to increase spending, boost inflation and stimulate the economy has done more harm than good.

What they're saying: Recent research from the San Francisco Fed finds that after the Bank of Japan announced negative rates in 2016, "market expectations for inflation over the medium term fell immediately."

  • "The reaction stresses the uncertainty surrounding the effectiveness of negative policy rates as expansionary tools," especially when inflation is as stubbornly low as it is now, researchers Jens Christensen and Mark Spiegel write.

Research on Europe's experiment with negative yields has drawn similar conclusions.

  • A study from the University of Bath concludes that negative interest rates have weakened demand and decreased lending because the additional costs reduce banks’ profit margins.
  • “This is a good example of unintended consequences,” said Ru Xie, one of the study’s authors. “Negative interest rate policy has backfired, particularly in an environment where banks are already struggling with profitability.”

Even so, incoming ECB president Christine Lagarde insists the eurozone would be "worse off" without negative rates, and the Fed looks to be headed toward an embrace of negative rates as well.

  • Minutes from July's FOMC meeting mention “ELB" 15 times. (ELB is the effective lower bound, a reference to the lowest level interest rates can go.) That's up from 0 mentions in the June meeting’s minutes, notes Ed Yardeni, president and chief investment strategist of Yardeni Research.
  • "The presumption is that the federal funds rate can’t fall below zero," he says in a note to clients. "Yet the minutes hinted that Fed officials might be thinking that if they have to lower the federal funds rate to zero, it’s a slippery slope from there to considering going negative."

Watch this space: European bankers are increasingly worried about the harm negative rates are doing to the business of banking and are trying to pass the cost onto consumers.

  • If that happens, people may start stuffing cash in their mattresses, worries Jesper Berg, director general of the Financial Supervisory Authority in Denmark. That would likely put more pressure on banks and shrink the financial industry.
  • “If you continue to stay in this environment,” Berg told Bloomberg recently, "something needs to give."

Go deeper: Fed tweets show Trump doesn't understand central banking

Go deeper

Trump tightens screws on ByteDance to sell Tiktok

Illustration: Aïda Amer/Axios

President Trump added more pressure Friday night on China-based TikTok parent ByteDance to exit the U.S., ordering it to divest all assets related to the U.S. operation of TikTok within 90 days.

Between the lines: The order means ByteDance must be wholly disentangled from TikTok in the U.S. by November. Trump had previously ordered TikTok banned if ByteDance hadn't struck a deal within 45 days. The new order likely means ByteDance has just another 45 days after that to fully close the deal, one White House source told Axios.

Updated 4 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 9:30 p.m. ET: 21,056,850 — Total deaths: 762,293— Total recoveries: 13,100,902Map.
  2. U.S.: Total confirmed cases as of 9:30 p.m ET: 5,306,215 — Total deaths: 168,334 — Total recoveries: 1,796,309 — Total tests: 65,676,624Map.
  3. Health: CDC: Survivors of COVID-19 have up to three months of immunity Fauci believes normalcy will return by "the end of 2021" with vaccine — The pandemic's toll on mental health — FDA releases first-ever list of medical supplies in shortage.
  4. States: California passes 600,000 confirmed coronavirus cases.
  5. Cities: Coronavirus pandemic dims NYC's annual 9/11 Tribute in Light.
  6. Business: How small businesses got stiffed — Unemployment starts moving in the right direction.
  7. Politics: Biden signals fall strategy with new ads.

Harris: "Women are going to be a priority" in Biden administration

Sen. Kamala Harris at an event in Wilmington, Del. Photo: Drew Angerer/Getty Images

In her first sit-down interview since being named Joe Biden's running mate, Sen. Kamala Harris talked about what she'll do to fight for women if elected VP, and how the Democrats are thinking about voter turnout strategies ahead of November.

What they're saying: "In a Biden-Harris administration women are going to be a priority, understanding that women have many priorities and all of them must be acknowledged," Harris told The 19th*'s Errin Haines-Whack.