Super-low interests rates aren't good for anyone

The very policy designed to kick start growth in the economy could end up stalling it, says Merryn Somerset Webb.

Super-low interest rates. What are they good for? I think the answer is now clear. Nothing. They are bad for big companies. They encourage them to issue far more debt than they need. That's been nice for them in the short term they can use cheap money to buy back their shares, pushing up share prices and paving the way for executives to get nice bonuses. But it won't be nice in the long run.

As Societe Generale's Andrew Lapthorne notes, big US companies are now horribly "overleveraged". So much so that he reckons it is reasonable to ask: "are central bank policies going to bankrupt corporate America?" Secondly, they push up pension deficits and cripple company cash flows (the lower rates go, the higher deficits go). A nasty pension deficit has been one of the problems dogging Tata Steel's UK operations, and CEOs across the country will tell you that they can't invest in their corporate future because all the cash goes to the pension scheme.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.