How Central Banks Set Negative Interest Rates

Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates · May 24, 2026 · 8m · transcript

When central banks push policy rates below zero, it flips conventional banking logic on its head. In this episode, Lucas and Luna explore how negative interest rates actually work in practice—using the European Central Bank's experience from 2014 through the 2020s as the central case. They break down the mechanics: why a negative deposit rate means banks pay to park reserves, how it is supposed to incentivize lending, and the real-world consequences that made the policy deeply controversial. Lucas brings data on how much the ECB's negative rate tiering system reduced the effective…