Newspaper article The Topeka Capital-Journal

Futures: European Interest Rates Go Negative

Newspaper article The Topeka Capital-Journal

Futures: European Interest Rates Go Negative

Article excerpt

Early Thursday morning, the European Central Bank announced it was making an unprecedented move: lowering interest rates below zero.

This means banks will actually pay 0.1 percent for the privilege of having their money held by the ECB. For years now, the United States and Japan have paid near-zero interest to banks for depositing funds with the government, but Europe's move to charging banks is new territory for a major economy.

The ultimate goal of these interest rate policies is to encourage banks to find something else to do with the money, such as lend it out to businesses or consumers, which policymakers hope will stimulate flagging economies. Economists and central bankers have been fearing a deflationary spiral could occur that would halt economic activity across Europe. Negative interest rates are intended to stimulate healthy, yet controlled, inflation.

The move to negative rates was largely anticipated, as ECB President Mario Draghi has been hinting at it for weeks. …

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