Market Insights

Those Crazy Negative Interest Rates

August 12, 2019

More than five years ago the European Central Bank adopted negative interest rates as a policy tool to address economic weakness in the Eurozone. Starting at -0.1%, eventually the target short-term rate fell to -0.4%. In Europe, as in every country or region that has tried Quantitative Easing, banks have not increased loans by the amount that QE suggested. As a result, central banks (like the ECB) have attempted to force banks to lend by “charging” banks (with negative rates) to hold these excess reserves. Negative interest rates are “man-made”,” not something that has happened organically…

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