Negative interest rates would take things to the next level. Here's how:If you take out a loan at a negative interest rate, you don't pay interest on the amount you borrow. Instead, the lender would pay you.
Right now, you end up paying more than the amount you originally borrow over the course of your loan because interest accrues. With negative interest rates, you'd end up paying back less than you borrowed, so you'd earn money in the long run. Negative interest rates would encourage people to buy homes, use credit cards, and take out other types of loans. By spending more, people would be helping the US economy.If the federal funds rate dropped below zero, you wouldn't earn interest at your bank — you'd actually pay a fee to keep your money in the bank. This fee would be relatively small — maybe a few dollars per month.
Charging people to keep money in the bank is meant to encourage people to spend their money, which puts money back into the economy.There has been plenty of debate about negative interest rates during the coronavirus pandemic, andThe Federal Reserve is the agency in charge of slashing rates, though, and Fed Chair Jerome Powell isn't convinced.Powell said, "There are plenty of people who think negative interest rates are a good policy.
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