The Conversable Economist

Did Negative Interest Rates Work ?

The article reviews evidence that central banks which pushed policy rates slightly below zero—most notably in the euro area, Switzerland, Sweden, Denmark and Japan—generated additional economic stimulus without triggering major disruptions. Empirical observations show that corporate deposit and wholesale funding rates fell below zero, loan‑rate pass‑through remained positive (often above 50% in the euro zone), and overall banking profitability was not harmed and could even improve. In contrast, household deposit rates hit the zero lower bound, limiting pass‑through to consumers. The author cautions that while modestly negative rates appear workable, deeper cuts remain controversial.