Negative rates explained in 60 seconds

Synopsis

Negative interest rates occur when the Central Bank charges Banks a fee for holding money, which may also apply to depositors, households, and companies. This policy aims to stimulate the economy by encouraging Banks to lend more and prompting households and companies to spend. Denmark experienced negative interest rates from 2012 to early 2014, which helped maintain a weak currency, benefiting exporters. The European Central Bank is considering implementing negative rates in response to low inflation and deflation fears. While the intended outcome is economic recovery, the effectiveness of negative interest rates remains uncertain, particularly for those holding money in banks subject to levies on deposits.