Factbox: Central banks go negative - to what avail?

FRANKFURT (Reuters) - Central bankers gather this week in Washington for the International Monetary Fund’s spring meetings amid continued questions about the global economy. Some of the world’s biggest central banks have cut rates into negative territory, hoping to boost growth and lift anemic inflation.

Even as the U.S. Federal Reserve is cautiously raising rates, central banks from the euro zone to Japan moved in the opposite direction, fuelling fears of a ‘currency war’ among countries trying to depreciate their currencies.

The following are the details what big central banks have done, why and what have been the consequences.


The ECB has kept its deposit rate in negative territory since mid-2014, hoping to boost ultra low inflation in the 19-member euro zone, spur lending and generate growth in a region still reeling from its sovereign debt crisis.

Facing deflationary risks tumbling commodity prices, the ECB has also been buying assets, mostly sovereign debt, since March 2015 and cut rates several times and most recently in March, when it reduced the deposit rate to -0.4 percent.

Still, low oil prices are keeping a lid on price growth and inflation sank back into negative territory, putting the pressure on the ECB to do more and more.


Facing low inflation and a strong currency, the Bank of Japan cut its key rate to -0.1 percent in January, introduced a three-tier deposit rate system and said it was ready to cut rates further if necessary.

The move unleashed a torrent of criticism at the bank and the yen, instead of weakening, has rallied to trade around an 18-month high against the dollar. The Japanese currency has gained more than 10 percent against dollar so far this year.


Since January 2015, both the of the SNB’s key interest rates have been in negative territory and its deposit rate is the lowest of any central bank in the world.

The three-month Libor range was set between –1.25 and –0.25 percent while the interest on sight deposits at the central bank is -0.75 percent.

However, the SNB’s most punitive rate had only been applied to just over a third of deposits as of the end of last year because the rest of the cash parked at the central bank was within its exemption threshold.

The SNB earned 1.2 billion Swiss francs ($1.26 billion) from its negative interest rates in 2015.

($1 = 0.9557 Swiss francs)


Facing low inflation and a strong currency, Sweden’s central bank cut rates to -0.5 percent in February from -0.35, despite a relatively strong economy and concerns that super low rates would further stoke a housing bubble.

The bank is also buying government bonds to stoke inflation and said it was prepared to intervene on currency markets to stem the krone’s rise, despite warnings from economists that it risked getting into a currency war.

Critics say the latest rate cuts show a too narrow focus on inflation and that they are fuelling a rally in house prices and lending. Riksbank Deputy Governor Martin Floden questioned the effectiveness of the latest rate cut in February and voted against it, along with another board member.


The Danish central bank cut its key deposit rate to -0.75 percent in early 2015 before a hike to -0.65 in January, fighting to keep the crown EURDKK=D3 currency from firming and keeping it pegged to the euro in a narrow range.

Investors poured cash into Danish assets in January and February last year, betting that the country would abandon its three-decade-old currency peg but the central bank held steady, intervening in the currency markets when necessary.

Banks have not passed the negative rates onto households, there has been no unusual increase in the demand for cash and the central bank made a profit of 2.2 billion Danish crowns ($336.60 million) in 2015, mostly as a result of pressure on the crown.

($1 = 6.5360 Danish crowns) NATIONAL BANK OF HUNGARY

Hungary’s central bank cut its overnight deposit rate to -0.05 percent in March, although its base rate, considered at the most important benchmark, is still 1.45 percent.

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Reporting by Balazs Koranyi, Joshua Franklin, Ole Mikkelsen and Daniel Dickson; editing by Mark John