In response to the global pandemic, central banks around the world scrambled to save their local and the global economy going as far as cutting interest rates to negative territory and as a part of a massive quantitative easing programme which was deployed. Central banks also amended policies in response to allow for extreme borrowing as the world is hit hard by a slow but sure global economic depression. Some of the extreme responses which the central bankers have resorted to are the massive money printing and stimulus cheques however some central banks also dipped their interests rates into negative territory as a historic response to the situation.
Negative interest rate occurs when the banks charge the user interest for putting their money in that particular bank. Essentially you get charged for trusting the bank with your money which quite the opposite of the norm which was to be paid interest for putting your money in the bank. The bank of Japan adopted negative interest rate in January 2016 and the rates were furthered in response to the global pandemic in 2020.
Negative interest rates mean that the bankers benefit most from than their clients by imposing these rates which is opposite to the norm. This rates also support the economy because they force the investors into the stock market and other investments options as they try to beat the negative rates and secure their finances. Other people might want to take all their funds out of the banks and hold on to cash which is not advisable because of inflation however the banks could alternatively set in restrictions to the amount of money they could withdraw as a possible measure to prevent large withdrawals which will leave the bank reserves empty and bankrupt. This is the reason as to why the stock and cryptocurrency markets are always on a rally whenever there are negative interest rates on the horizon.
Freelance contact me: Mactheblogger13@gmail.com
Mackarbo8@gmail.com
Comment with your favourite topic and get a shout-out on our next article