A negative interest rate refers to interest paid to borrowers rather than to lenders. Central banks typically charge commercial banks on their reserves as a form of non-traditional expansionary monetary policy, rather than crediting them. This is a very unusual scenario that generally occurs during a deep economic recession when monetary efforts and market forces have already pushed interest rates to their nominal zero bound. It is meant to encourage lending, spending, and investment rather than hoarding cash, which will lose value to negative deposit rates. Negative rates are normally set by central banks and other regulatory bodies. They do so during deflationary periods when consumers hold too much money instead of spending as they wait for a turnaround in the economy. Consumers may expect their money to be worth more tomorrow than today during these periods. When this happens, the economy can experience a sharp decline in demand, causing prices to plummet even lower.Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

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