NEGATIVE INTEREST RATES

Nov. 14, 2019

President Donald Trump criticised the Federal Reserve’s raising and then cutting of interest rates as it puts the United States at a competitive disadvantage with other countries and thus called for introducing negative interest rates.

About:

  • What is it? A negative interest means that instead of the bank paying you money to keep in the savings account, you pay the bank to do so. It also means that anyone can borrow money from the bank and pay back less than what he borrowed.

  • Objective: Negative interest rates are expected to make consumers save less and spend more; they are also expected to make banks lend more. In essence, negative interest rates are expected to boost economic activity when all other efforts fail.

  • Global scenario: Sweden did it first in 2009 but now European Central Bank rates are also negative as are Japanese rates.