How Negative Interest Rates Actually Work

Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates · Jun 18, 2026 · 8m · transcript

Episode 58 of Monetary Policy Explained digs into negative interest rate policy (NIRP), a controversial tool used by the European Central Bank, the Bank of Japan, and others. Lucas and Luna walk through the mechanics: how charging banks on excess reserves is supposed to stimulate lending, why it creates strange incentives, and what the evidence says after nearly a decade of real-world testing. They look at the European Central Bank's tiered system implemented in 2019 to protect bank profitability, and they discuss why negative rates haven't spread to the United States. Specific…