Until recently there was a lot of scepticism that central banks would be able to set policy rates below zero. But in practice, the introduction of negative policy rates by four European central banks over the past year has been relatively straightforward. What’s more, they have helped to reduce longer-term interest rates and to stem the upward pressure on some currencies. Although negative policy rates are not currently on the agenda elsewhere, their successful implementation in a handful of European economies suggests that other central banks, including the Bank of Japan, may yet follow.
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