Although negative nominal interest rates are widely scorned, they are regularly used to supplement the monetary-policy arsenal when inflation is low and economic activity is weak. Given the dearth of alternative tools at central banks' disposal, they will inevitably remain an option somewhere.
RALEIGH – Once again, the idea of negative interest rates has made headlines, following the Swiss National Bank’s (SNB) decision in December to cut its policy rate to a mere 0.5%. When this issue has come up in the past, commentators have decried negative nominal interest rates as “a calamitous misadventure,” “anti-capitalistic,” and even the “dumbest idea in the history of economics.” And though the official accounts from officials at central banks that implemented negative rates were less scathing, they were hardly enthusiastic.
RALEIGH – Once again, the idea of negative interest rates has made headlines, following the Swiss National Bank’s (SNB) decision in December to cut its policy rate to a mere 0.5%. When this issue has come up in the past, commentators have decried negative nominal interest rates as “a calamitous misadventure,” “anti-capitalistic,” and even the “dumbest idea in the history of economics.” And though the official accounts from officials at central banks that implemented negative rates were less scathing, they were hardly enthusiastic.