Negative interest rates: The world turned upside down – NAB

By FXStreet Research Team at NAB, suggests that the latest ECB move highlights negative interest debate.

Key Quotes

“Negative interest rates – where lenders pay interest to borrowers – got little attention until recently as they were confined to a few Euro-zone neighbours trying to keep down their currencies and lift inflation back to target. Below target inflation has now resulted in negative policy deposit rates in the Euro-zone and Japan. The ECB is now charging commercial banks 0.4% to deposit their money with it but is willing to pay 0.4% interest to commercial banks who lift lending to household and non-financial business customers. The US and Canadian central banks are also exploring the concept but UK central bankers are less keen, saying it can resemble a “beggar thy neighbour” policy of competitive currency depreciation.

With interest rates so low in many parts of the world, there is concern that other central banks might one day need to use negative rates in the event of another economic downturn. Australia and New Zealand’s policy rates of 2% and 2¼% respectively are at the high end of the spectrum among OECD economies but very low by historical standards and by the yardstick of rate cuts implemented …read more

Source:: FX Street