How Central Banks Set Negative Interest Rates

When central banks push policy rates below zero, it flips conventional banking logic on its head. In this episode, Lucas and Luna explore how negative interest rates actually work in practice—using the European Central Bank's experience from 2014 through the 2020s as the central case. They break down the mechanics: why a negative deposit rate means banks pay to park reserves, how it is supposed to incentivize lending, and the real-world consequences that made the policy deeply controversial. Lucas brings data on how much the ECB's negative rate tiering system reduced the effective burden on banks, and they discuss whether negative rates helped or hurt inflation in the Eurozone. They also touch on why other central banks, like the Bank of Japan and the Swiss National Bank, adopted negative rates while the Federal Reserve never did. The conversation closes by asking whether negative rates are a tool that central banks will reach for again in the next downturn—or whether the costs have permanently soured policymakers on the strategy. #NegativeInterestRates #CentralBanks #EuropeanCentralBank #ECB #MonetaryPolicy #Economics #BankOfJapan #SwissNationalBank #FederalReserve #Inflation #Tiering #DepositFacility #Lending #Banks #Eurozone #PolicyTools #FexingoBusiness #BusinessPodcast Keep every episode free: buymeacoffee.com/fexingo