Negative interest rates are when the central banks, such as the Federal Reserve, set the interest rate below zero, meaning that instead of the bank paying out interest to customers, the customers are charged to hold their money in the bank. This means that borrowers will be charged to take out loans, and savers will be charged to keep their money in the bank. This policy is used to encourage people to spend, invest, and borrow money, as they are essentially penalized for keeping their money in the bank. This can often lead to a devaluation of the currency, as investors look to invest elsewhere, and the purchasing power of the currency decreases. Negative interest rates are an unconventional monetary policy, and can have both positive and negative effects on the economy.
Negative interest rates are a relatively new phenomenon in economics and finance. They refer to a situation in which the central bank sets an interest rate below zero, meaning that banks and other financial institutions must pay the central bank to store their cash reserves. This policy is intended to incentivize banks to lend out more money to businesses and consumers, and to stimulate the economy. Negative interest rates can also have the effect of weakening a currency, making imports more expensive and exports more competitive. While the implications of negative interest rates are still being explored, they offer a unique tool in the central bank's arsenal to help stimulate economic growth.