'Xie also said that sub-zero rates appear to have acted against other unconventional forms of central bank policy, such as quantitative easing, introduced in the wake of the great recession.''Central banks’ negative interest rates were supposed to increase spending, stop deflation and stimulate the economy. They may have done the exact opposite.
According to research from the University of Bath, central banks charging commercial banks to hold excess cash reserves have actually decreased lending. That’s because the additional costs reduce banks’ profit margins, leading to a drop in loan growth.
“This is a good example of unintended consequences,” said Dr. Ru Xie of the university’s School of Management, one of the study’s authors. “Negative interest rate policy has backfired, particularly in an environment where banks are already struggling with profitability.”
Xie also said that sub-zero rates appear to have acted against other unconventional forms of central bank policy, such as quantitative easing, introduced in the wake of the great recession.'
- Eddie Spence,
Negative Rates Actually Cut Lending, Research Shows, August 29, 2019 (
Lagarde Praises Negative Rates, Study Shows They Reduce Lending, August 30, 3019
ContextCORRECTED-UPDATE 2-Swedish central bank to exit negative rates in Dec despite slowdown, Ocotober 24, 2019
Good Reason to Expect Recession: Greenspan Doesn't, November 3, 2019
'..a gross excess of speculative leverage..''[Volcker] was famously booed at a Washington Bullets basketball game when he had rates very high..'(Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'