Negative Interest Rates Policy with examples

Need GDP growth? Make people addicted to shopping and saving less. Why? Because it’s the way how modern economy work. The GDP growth rate could not be achieved if citizens (tourists) don’t spend money.

In last a few years interesting GDP growth stimulation used: negative interest rate policy. That means depositors must pay a fixed percent from deposit in order to keep money in the bank. In simple way: you don’t get the interest rate on deposit (bank don’t pay you, you pay to the bank).

Negative Interest Rate Policies used to stimulate investment and spending pattern. According to the Global Interest Rate Monitor a few countries follow zero or negative monetary policy rates:

  1. European Union: 0%.
  2. Bulgaria: 0%.
  3. Denmark: -0.65%.
  4. Japan: -0.1%.
  5. Sweden: -0.25%.
  6. Switzerland: -0.75%.

Currently available bonds with negative interest rate (bond price and face value different). It’s unique situation when bond buyers have to pay money to the government to buy bonds. According to Bloomberg reports in US high possibility of negative interest rate in the next recession.

Negative interest rates stay below the inflation rate and lead to guaranteed loss of invested capital. In EU debt problem which could not be solved without strong economic growth. By sub-zero interest rate Central Bank insured slow confiscation of capital. For regular consumers sub-zero interest rate means cheaper loans and higher need to invest in technology and business.

Negative interest rate policy delivered questionable result and long term influence yet to be discovered.

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