# Negative Interest Rates

*Macro & Economy — Finicade finance glossary*

Negative interest rates mean depositors pay to keep money rather than earning on it — a policy used to force lending and weaken a currency.

Negative interest rates mean depositors pay to keep money rather than earning on it, a policy used by the ECB, Bank of Japan and others to force lending and weaken currencies. They work because physical cash storage has real costs, so the effective lower bound is below zero rather than at it. The unresolved side effect is bank profitability: squeezed deposit margins can reduce lending, undoing the intended stimulus.

**Also known as:** NIRP, sub-zero rates, negative yields

**Related terms:** [Monetary Policy](https://finicade.com/glossary/monetary-policy), [Liquidity Trap](https://finicade.com/glossary/liquidity-trap), [Neutral Rate](https://finicade.com/glossary/the-neutral-rate), [Quantitative Easing](https://finicade.com/glossary/quantitative-easing), [Vasicek Model](https://finicade.com/glossary/vasicek-model)

Source: https://finicade.com/glossary/negative-interest-rates