for a long time economists believed that nominal interest rates, or the amount of money received for depositing money, were theoretically bounded by zero to the downside. if the central bank sets the nominal rate at 1% annualized and inflation is 2% a year, the real rate would be effectively negative 1%. in other words, the depositor has lost money by keeping it in the bank.the negative nominal rates that have been in the news as central banks seek to stimulate their sagging economies, affect a very specific rate that only impacts members of the banking or financial system.
interest rates are now negative, below zero, for a growing number of borrowers, mainly in the financial markets. of these, perhaps the most controversial and least understood is negative interest rates. the central bank of denmark was the first to go below some japanese firms, facing the possibility of negative interest rates on their deposits, would consider stuffing their cash in a safe rather than negative interest rate wiki, negative interest rates us, negative interest rates europe, negative interest rates implications, negative interest rates history, negative interest rate japan, negative interest rate countries, everything you need to know about negative rates
it is important to understand that negative interest rates only apply to a small portion of funds, exceeding a certain amount, held by the central bank on behalf of the financial sector. a negative nominal rate could serve to bring down all of those rates as well. many see this as a signal of desperation by central bankers who have failed to stabilize macroeconomic activity via traditional monetary policy methods, or even by quantitative easing (qe).japan now joins the european central bank (ecb), sweden, switzerland and denmark in enacting a negative interest rate policy in order to kick-start the economy.