negative interest rates and the effects on the average Joe

Question

negative interest rates and the effects on the average Joe

In: Economics

Answer 1

A negative interest rate is literally the opposite of receiving savings from storing cash. It’s a strategy that a central bank (in most recent history I think Japan had a negative interest rate) to encourage spending and lending to encourage economic growth.

ELI5: When you put money in a savings account, it generates interest and eventually you get more money. Banks have the same thing – but a central bank can enact negative interest rates – meaning when they leave cash in their banks it loses value – meaning it’s more economical for the bank to offer loans instead of hoarding cash.