• Negative interest rates are a form of monetary policy in which interest rates fall below 0%.
  • Central banks and regulators use this unusual policy tool when there are clear signs of deflation.
  • Borrowers earn interest instead of paying interest to lenders under negative interest rate conditions.
  • Central banks charge commercial banks with reserves to encourage them to spend rather than accumulate cash positions.
  • While commercial banks charge interest for holding cash at a country’s central bank, they are generally reluctant to pass on negative interest rates to their customers.