Negative real rate. Negative rates have stunned the financial world. Can the nominal interest rate be negative?

Russians who complain about high mortgage rates can only envy Europeans, some of whom banks pay extra “in gratitude” for the loan they took out. The first bank to switch to negative lending rates was Nordea Bank. This happened in Denmark at the beginning of last year. Since then, at least two other banks in Belgium - BNP Paribas and ING - have paid extra to their clients. In particular, this was recently reported by Het Neuwsblad. The banks in question argued that the negative rates only affected a “limited number of contracts.”

These situations arise for loans with a floating interest rate (these are mainly mortgage loans), depending on key and interbank rates, explains Natalya Pavlunina, head of the retail products department of the retail business department of Loko-Bank.

When, for example, the key rate reaches negative values, the interest rate on the loan also becomes negative. The current values ​​of the European interbank offered rate Euribor and a number of others have become negative and, depending on the period, range from -0.348% per month to -0.012% per year, notes the CEO. Accordingly, if a number of banks in their loan agreements have tied client rates to Euribor, then it turns out that it is no longer the client to the bank, but the bank that must pay the client for giving him a loan.

Negative rates on the interbank market and the entire phenomenon of negative rates in general are a consequence of the ultra-soft monetary policy pursued (as well as by central banks of other developed countries). “The central banks of most developed countries have been pursuing expansionary monetary policies over the past five years, reducing lending rates to a minimum and introducing negative rates. The European Central Bank and the Bank of Japan are trying to stimulate the economy with negative rates. Central banks of European countries (Switzerland, Sweden, Denmark) use negative deposit rates to reduce capital inflows and adjust course national currencies against the euro,” notes the chief analyst of the analytical department.

The European Central Bank took a new round of easing its policy at its meeting on March 10 this year. He lowered the key rate from 0.05% to zero, and the deposit rate was lowered from -0.3 to -0.4%. In addition, the volume of asset repurchases from the market was expanded from €60 billion to €80 billion per month. The de facto head did not rule out introducing a negative key rate. “Looking ahead, taking into account the current outlook for price stability, the Governing Council expects the ECB's key interest rates to remain at current or lower levels for an extended period of time,” he said.

A negative rate (on deposits) should ideally encourage commercial banks to lend more, rather than hoard money in accounts with the Central Bank. The population, for whom the return on deposits is decreasing, must spend more, which, coupled with the emission pumping, should accelerate inflation to the target 2% and increase the income of the corporate sector.

In practice, things don't work out so smoothly. The population does not spend, but saves, but increasingly prefers to keep money in demand accounts (this requires banks to have a large amount of liquidity, which is unprofitable) or even keeps it at home in the form of cash. Inflation is not growing (deflation has already been recorded in the eurozone several times this year), as cheap energy resources are pulling consumer prices down.
Analysts believe that "so far, negative interest rates have failed to raise inflation expectations in the eurozone, Switzerland and Japan, and have shown only marginal effectiveness in this regard in Sweden."

The former head of the company, in one of his interviews, noted that negative rates lead to a reduction in capital expenditures, and low investments do not allow increasing labor productivity. The result is low economic growth rates. Banks are forced to invest money in highly liquid government bonds, but their yield is often also negative. provides such data. There are currently €2.6 trillion worth of negative-yielding bonds traded in the eurozone. When purchasing seven-year German government bonds, an investor will lose €2 per thousand every year. It turns out to be a vicious circle that only leads to a drop in income in the banking system.

Dangerous experiment

American analysts called the ECB’s negative rates a “dangerous experiment.” “We believe that the potential decline in banking profitability due to low benchmark and negative deposit rates will be a major risk factor for European banks in 2016,” Morgan Stanley said. Russian analysts also do not see anything good in negative rates. Konstantin Petrov believes that the current financial policy of artificial economic stimulation through ultra-low rates and increasing the money supply in the context of a decrease in real production does not lead to inflation, but to deflation and the continuation of speculative growth in stock markets, where excess liquidity is concentrated. This may negatively affect the stability of banks and, instead of stimulating economic growth, lead only to prolonged stagnation. “As a result, this could lead to big problems in the financial infrastructure and another round of the financial crisis,” he believes.
, an analyst at Alfa Capital Management Company, believes that stories with negative client rates are one-time anomalies and such loans will not be carried out on a mass scale, therefore these particular cases do not pose a threat to the banking system. But globally negative rates create certain risks, including forcing banks to adjust their approach to risk management, increasing exposure to risk in order to compensate for the decrease in income from falling rates and to place excess liquidity, he notes.

“As a result of this, bubbles may inflate in the markets, which will ultimately at least complicate the process of normalizing monetary policy, and in a bad scenario may provoke new waves of crisis,” Andrei Shenk fears.

At the same time, analysts believe that banks will not put up with negative rates. “It is unlikely that banks will allow this phenomenon to become widespread,” believes Konstantin Petrov. Dmitry Monastyrshin draws attention to the fact that since banks in developed countries have the opportunity to attract funds from clients and regulators at negative rates, banks manage to maintain margins on client contracts, even if the rate on them goes negative. It is worth noting that even with negative loan rates, the client will most likely have to pay the bank a small amount in addition to the principal debt due to the presence of service fees. “However, the situation when the lender pays the borrowers is inherently absurd and bankers in the relevant countries are already taking measures to protect their capital,” notes Natalya Pavlunina. According to her, a number of European banks have already supplemented their mortgage lending conditions, fixing the minimum possible value of the loan rate, and also turned to regulators for clarification and the possibility of changing legislation. The only question that remains unanswered is how the financial system will fare if the ECB and other regulators continue to ease their monetary policy and inflation and the economy do not recover.

In some Swiss banks, interest rates on retail deposits have already dropped below zero. Are negative interest rates on deposits possible in Russia?

Of course, negative rates are a nightmare for savers, but they would be very welcome for borrowers. Imagine: you take a ruble and return fifty dollars. Dream!

Of course, savvy investors can combat negative rates by moving into cash. However, for a VIP, going to the cache is not an option. After all, the costs of storing and transporting cash can “eat up” up to 1% per year.

Essentially, negative deposit rates are the equivalent of a tax on money. Previously, negative rates were considered a theoretical delight. Although initially “proto-banks” (for example, goldsmiths) charged a fee for storing money - for placing deposits.

The idea of ​​demurrage, negative interest rates, by German businessman and social reformer Silvio Gesell (1862-1930) was not seriously considered for a long time. It was believed that the natural limit on interest rates was zero.

However, already in April 2009, Gregory Mankiw predicted a negative Fed key rate in the New York Times. If lower interest rates stimulate the economy, and the key rate is already close to zero, why not reduce the rate to negative values? The idea of ​​negative rates seems absurd: lend a dollar, get 99 cents. But the idea of ​​negative numbers, reminds Mankiw, initially seemed absurd.

Mankiw’s prediction quickly came true, although not with regard to the Fed: in July 2009, the Riksbank, Sweden’s central bank, introduced negative rates.

Then negative key rates were established in a number of other countries, including Switzerland, Japan, Denmark, as well as in the eurozone countries (deposit rate - -0.4% per annum). Moreover, negative interest rates have also been established in the interbank lending markets of some countries. Bond yields have also turned negative in some countries.

The Japanese and Germans responded to ultra-low interest rates by increasing demand for safes. Negative rates pose a threat of a run on banks and can lead to a liquidity crisis.

Probably the first bank to upset its customers with negative interest rates on deposits was Alternative Bank Schweiz, which since 2016 introduced a rate of -0.75% on deposits worth more than 100 thousand Swiss francs. Another well-known Swiss bank, Lombard Odier, upsets its wealthy clients in the same way. So the first victims of negative deposit rates are wealthy clients - it is difficult for them to “escape to cash”.

Are negative rates possible in Russia? Not excluded. The condition for their appearance may be deflation. Deflation itself is pleasant and useful for consumers - what's wrong with falling prices? However, it is not deflation that is bad, but its main reason - a reduction in demand - for example, due to a crisis. People don't have money to buy goods, so prices are falling. Of course, if the reason for the decline in prices is a reduction in production costs, for example, as a result of technological progress, then one can only rejoice at such deflation.

For now, the threat of negative interest rates in Russia appears to be low. However, a recession may lead to the realization of this threat. It is possible to soften monetary policy even to negative interest rates.

These are strange times for European borrowers. It’s as if they live in Through the Looking Glass, where all the rules of financial existence are turned inside out. How do you like a business loan at an interest rate of minus 0.1%? Yes, yes - banks now pay their borrowers extra for taking out loans. Of course, you have to pay additional fees, and they still make the loan traditionally paid. But the bank's remuneration now amounts to no more than a percent or two. The weirdness doesn't end there.

Investors provided Germany with about $4 billion of their funds. They provided it this week, knowing that not all the money would be returned - the same negative interest rates still rule the roost. And not only government bonds, but also the securities of individual corporations, the Swiss Nestlé, for example, became unprofitable for investors.

On the other side of zero

Of course, consumer and mortgage loans with negative rates are still a rare phenomenon, although some people are really lucky. While most banks are still considering their actions in the current circumstances, individual lenders have taken the actions of their central banks as a direct call. But depositors were much less fortunate - the negative rate turned out to be unprofitable for them, and now they have to pay the banks for using their deposits.

Negative interest rates in politics

Switzerland unpegged its franc from the euro, which sent markets into shock, while simultaneously cutting its key rate to negative. The Central Bank of Denmark reduced the rate as many as 4 times and in just a month. Now in this country the main rate is -0.75%. Sweden followed suit. And what’s going on in European securities markets is a topic worthy of economic research.

Back to consumers

Of course, all these incidents have not yet become widespread, and therefore depositors can still transfer their money to other banks. And bonds of emerging markets can still be an excellent alternative to European bonds.

In Russia, a fall in interest rates on loans is not yet expected. Therefore, businessmen also have to include the costs of servicing bank loans as other expenses. However, despite the rise in prices, business loans have not become more accessible - banks are still very demanding of entrepreneurs. But still

The phenomenon of negative interest rates is a modern trend that began in 2008. As a result of the financial crisis that broke out in the United States, the growth rate of leading economies slowed down, unemployment rose, and consumption declined. Central banks were forced to reduce interest rates in order to minimize the negative impact of these trends on the population and business. As a result, the discount rates of leading central banks were reduced to record lows:

The credit resource became more accessible, however, the policy of “cheap money” did not have the desired impact on macroeconomic statistics. This was largely due to the fact that the presenters. The United States was the quickest to recognize this fact and react to it – in 2008 it launched an economic stimulus program called “quantitative easing” or QE.

The speed of decision-making predetermined the vector of further developments. Key US macroeconomic indicators have recovered to pre-crisis levels over several years, while their European counterparts remain less attractive even 6 years after the start of the crisis. A striking example is unemployment (the moments of the launch and completion of the US economic stimulus program are highlighted):

Despite low rates, the problem of European economic recovery remained, and when the threat of deflation was added to it, . The regulator carried out regular verbal interventions; in September 2014, a negative deposit rate was introduced, and in 2015, a rate similar to the American QE.

Negative rates in the Eurozone

The ECB's negative deposit rate does not have a direct impact on household savings in commercial banks, since it only applies to certain commercial bank accounts with the Central Bank. The key goal of introducing this measure is to restore the lost rates of economic growth and return inflation to the target level of 2%. With the help of an ultra-soft monetary policy, the Central Bank seeks to increase the rate of lending to the population. Currently, the level of household spending in the Eurozone is below pre-crisis levels:

“Cheap money” should stimulate consumption; if this indicator grows, retail sales will increase, and businesses will be more willing to expand and, as a result, create new jobs. In addition, negative ECB deposit rates should encourage banks to increase the pace of lending to the real sector of the economy.

Negative yield?

The discount rate of the Central Bank of Switzerland and Denmark is at minus 0.75%, in Sweden – minus 0.1%. The logic of the central banks of these countries is similar to the logic of the ECB. At the same time, despite the fact that deposit rates for the population are not negative, the yield of individual debt securities was already negative. A similar situation was observed in the market for government debt securities in Denmark, Sweden, Switzerland and Germany and was caused by increased demand.

This demand can be divided into speculative purchases in anticipation of the full implementation of the QE program; acquisitions by banks, which, in the context of negative ECB rates, consider it more rational to place reserves in high-quality debt securities; purchases of large institutional participants using a passive asset management strategy (for example, pension funds).

As the QE program increases, the ECB will buy more and more European debt securities, as a result of which both the yield on bonds of problem countries and the yield on debt securities of economies that are quite solvent will decrease. QE was launched relatively recently, and I think that in the future we can expect a continuation of the downward trend in yields on European government and corporate debt securities.

Declining yields coupled with low lending rates will most likely contribute to a shift in the interest of certain groups of investors and an increase in the volume of investments in the European stock market. Leading European stock indices have remained attractive since the announcement of the European QE program in October 2014 and are likely to remain so for a long time to come.

The EURUSD pair is declining due to a stable combination of the ECB's ultra-loose monetary policy and expectations of an upcoming rate hike from the US Federal Reserve. Long-term trend, the immediate goal is parity.

The effectiveness of negative rates

It will be extremely difficult to assess the impact of negative rates on the economy separately from other methods of stimulation, since this is a set of measures that are applied simultaneously and have a cumulative impact on macroeconomic statistics; in addition, the effect of their implementation will most likely appear with a significant time lag.

The growing popularity of ultra-loose monetary policy among leading central banks provokes a depreciation of the national currencies of countries involved in such a currency race. Business conditions are becoming increasingly attractive for exporters, while importers suffer as foreign goods become more expensive due to exchange rate differences.

The ultra-soft policies of individual countries lead to suppression of the exports of their trading partners if they do not take similar measures and the exchange rate of their national currency does not decline. In other words, the introduction of aggressive measures to stimulate the economy by the central banks of leading economies may provoke a deterioration in the macroeconomic indicators of their trading partners and, as a result, contribute to the introduction of similar monetary policies by the latter.

According to statistics, the EU's key importers are China (16.6%), Russia (12.3%), the USA (11.7%) and Switzerland (5.6%). The fall of the euro will primarily affect the volume of imports from China, the USA, and Switzerland, since the national currencies of these countries are strengthening or do not show a decline comparable to that observed in the European currency market. In my opinion, the era of negative rates will last at least 1.5 years, and the key indicator of its end is the state of the Eurozone economy.

More detailed information about the reasons for the decline of the EURUSD pair and the prospects for the US and EU economies and in the form.

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The story takes place in the city of Silent Hill. Ordinary people wouldn't even want to drive past it. But Rose Dasilva, little Sharon's mother, is simply forced to go there. There is no other choice. She believes that this is the only way to help her daughter and keep her out of the psychiatric hospital. The name of the town did not come out of nowhere - Sharon constantly repeated it in her sleep. And it seems like a cure is very close, but on the way to Silent Hill, mother and daughter get into a strange accident. Rose wakes up to find that Sharon is missing. Now the woman needs to find her daughter in a cursed city full of fears and horrors. The trailer for the film is available for viewing.

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Kara Harding is raising her daughter alone after the death of her husband. The woman followed in her father’s footsteps and became a famous psychiatrist. She studies people with multiple personality disorder. Among them there are those who claim that there are many more of these individuals. According to Kara, this is just a cover for serial killers, which is why all her patients are sent to death. But one day the father shows his daughter the case of the tramp patient Adam, who defies any rational explanation. Kara continues to insist on her theory and even tries to cure Adam, but over time, completely unexpected facts are revealed to her...

Mike Enslin doesn't believe in an afterlife. As a horror writer, he is writing another book about the supernatural. It is dedicated to poltergeists living in hotels. Mike decides to settle in one of them. The choice falls on the infamous room 1408 of the Dolphin Hotel. According to the hotel owners and city residents, evil lives in the room and kills guests. But neither this fact nor the senior manager's warning frightens Mike. But in vain... In the issue the writer will have to go through a real nightmare, from which there is only one way to get out...

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