First there was zero interest-rate policy. Now a number of countries are toying with the idea of negative interest rates, an unconventional monetary experiment that—despite the upside—some economists consider ineffective, if not outright dangerous. But how exactly do they work? And how can interest rates be moved below the theoretical lower-bound of zero? Bisnow breaks down the economics behind it—and gives you a quick take on everything you need to know about negative interest rates.
Why are negative interest rates in the news?
Negative interest rates made headlines in January, when the Bank of Japan stunned the markets by introducing the country’s first-ever negative interest rate policy. The move was completely unexpected, as BOJ Gov. Haruhiko Kuroda (pictured) seemed bullish on the economy as recently as December. Previously, only the European Central Bank, Denmark, Sweden and Switzerland had moved their rates into negative territory.
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