What is Negative Interest Rate? I want to know about Negative Interest Rate. What it is? Is it good or bad? How it affects economy and thus general people?
I have been reading these words a lot lately in business news...
An interest rate is the percentage that is paid for borrowing money, and that one gets for lending. If it is negative that means you have to pay so that someone takes your money for a while. So how could that even work, why should anyone lend money under such conditions? Normal savers would just keep their money with them, even if that bears the risk that it might get stolen more easily than from a bank. What can however happen is that the real interest rate is lower than zero and people still keep their money at the bank. The real interest rate is the (nominal) interest rate minus inflation. In times of high inflation this can easily happen, and as you see here in the world bank data it frequently happens in many countries: http://data.worldbank.org/indicator/FR.INR.RINR

In times of crisis and low inflation central banks can even lower the short term nominal deposit interest rate below 0 in order to give incentives to commercial banks to lend out money that because of mistrust they would otherwise rather just store at the central bank and wait for better times. There is no consensus if this is good or bad and if it works and how it affects the economy and the people. The European Central Bank adopted this strategy since mid 2014 because of the severe crisis, and the Japanese central bank followed in January 2016.(WSJ) The idea is to stimulate the economy, which should lower unemployment. It should also make the currency unattractive, so its value should decrease compared to others and that makes exports easier as long as other central banks do not do the same. Some say this goal can be achieved better with the negative interest rate than the goal to stimulate the economy via increased lending of commercial banks, and especially in smaller economies like Denmark, and Switzerland, the mechanism seems to have helped to protect companies from getting too much harmed by currencies getting too strong too quickly.(ST)
In March 2016, the European Central Bank even started to offer commercial banks a negative interest rate for loans, rewarding lenders.(NYT)

There are also bonds that have negative interest rates.(BBC) This phenomenon needs some additional explanation and has its own question here.