How Do Low and Negative Interest Rates Affect Banks?

Olivia Lofton and Mauricio Ulate

FRBSF Economic Letter, 2021, vol. 2021, issue 23, 01-05

Abstract: Developed countries have recently turned to very low—even negative—interest rates to try to stimulate their economies. Low or negative rates can affect banks in novel ways because they often base their retail rates on the policy rate. In particular, the rate banks pay households for deposits usually remains at zero during times of low or negative policy rates, rather than falling together with the policy rate, as it would during normal times. This can decrease banks’ net interest margins, negatively impacting their profitability, equity, and ability to lend.

Keywords: Interest; rates (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.frbsf.org/economic-research/files/el2021-23.pdf Full text – article PDF (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfel:92990

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in FRBSF Economic Letter from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().