IMF Researchers: Nothing cold about sub-zero interest rates

Reuters reports the findings from the latest research conducted by the International Monetary Fund (IMF) on the impact of sub-zero interest rate policy in the Euro zone, Denmark, Japan, Sweden and Switzerland.

Key Findings courtesy Reuters:

Negative interest rates imposed by central banks have generally worked as a tool to boost inflation, pulling down yields and sometimes weakening currencies

"For the ancient Egyptians, zero represented the base of pyramids. In science it became the freezing point of water, in geography the altitude of the sea, in history the starting point of calendars," the researchers noted before going on to ask what zero meant in monetary policy terms.

"Overall, the policy seems to have worked well: money market rates and bond yields fell in every country we looked at. Currencies also weakened somewhat, at least temporarily," the researchers wrote.

"Lending rates declined somewhat, though less than policy rates. Banks benefited from lower wholesale funding costs, and some raised fees. Bank profits have generally been resilient. Lending has held up."

"If policy rates remain negative for a long time, or if a deeper dive below zero is contemplated, the effectiveness of the policy and the stability of the financial system could be at risk," the researchers said.