April 4, 2023

What does a negative interest rate mean?

A negative interest rate is a situation in which a borrower pays the lender instead of the other way around. This means that instead of receiving interest, the lender pays the borrower a fee for holding their money. This type of rate is usually used as a last resort to stimulate economic growth and is seen as a sign of a struggling economy. Negative interest rates can have a damaging effect on savings, investments, and currency values. It can also lead to increased borrowing costs and reduced spending, which can further weaken an economy. Therefore, negative interest rates should be used as a last resort to kickstart an economy, and it is important to weigh the consequences carefully before implementing them.