what is a negative interest rate 
the term negative interest rate refers to situations in which interest is paid to borrowers rather than to lenders when interest rates are negative central banks typically charge commercial banks on their reserves as a form of non traditional expansionary monetary policy rather than crediting them this is a very unusual scenario that generally occurs during a deep economic recession when monetary efforts and market forces have already pushed interest rates to their nominal zero bound this tool is meant to encourage lending spending and investment rather than hoarding cash which will lose value to negative deposit rates understanding negative interest ratesan interest rate is effectively the cost of borrowing this means that lenders charge borrowers interest when they take on any type of debt such as a loan or mortgage although it may seem strange there are instances where lenders may end up paying borrowers when they take out a loan this is called a negative interest rate environment negative rates are normally set by central banks and other regulatory bodies they do so during deflationary periods when consumers hold too much money instead of spending as they wait for a turnaround in the economy consumers may expect their money to be worth more tomorrow than today during these periods when this happens the economy can experience a sharp decline in demand causing prices to plummet even lower 