Issue of negative interest rates
- It means that commercial banks will be charged if they put excess money with central bank. Banks will be motivated to lend in the market rather than keeping their money with central bank.
- It is an unconventional tool followed when there is a risk of deflationary spiral in the economy.
- This measure can help to reduce value of a currency.
- Foreign investment inflow in developing countries may increase.
Some adverse impact
- It will hurt deposit holders
-They will keep more and more cash in their house.
- the drain of cash from the banking system could actually lead to a rise in interest rates – the exact opposite of what negative interest rates are supposed to achieve.
DICS
No comments:
Post a Comment