Source: IMF in French Negative interest rate policies: the data is there Luis Brandao-Marques and Gaston Gelos March 3, 2021 Interest rates are low, and the phrase “lower for longer” has somehow become a buzzword among policymakers, regulators and other market watchers. In contrast, negative interest rates raise entirely new questions. After eight years of negative interest rate policies, the initial skepticism (paying interest to borrowers rather than savers was admittedly unprecedented) has turned out to be unwelcome. According to the data available to date, negative interest rate policies seem to have worked. Since 2012, a number of central banks have implemented negative interest rate policies. In Denmark, the euro area, Japan, Sweden and Switzerland, central banks have opted for these policies in response to inflation rates stubbornly below targets (most central banks set rates as part of the their broader mission of maintaining price stability, thereby promoting employment and economic growth). These banks have also reacted to a very low level of the “neutral real interest rate”, that is, the real interest rate at which monetary policy does not contract or expand. This move highlighted the difficulty of central banks in stimulating inflation, even though they had already cut interest rates to zero.