Negative Interest Rates What Is a Negative Interest Rate? Negative Interest Rates • Negative interest rates are a form of monetary policy that sees interest rates fall below 0%. • Central banks and regulators use this unusual policy tool when there are strong signs of deflation. • Borrowers are credited interest instead of paying interest to lenders in a negative interest rate environment • Central banks charge commercial banks on reserves in an effort to incentivize them to spend rather than hoard cash positions. • Although commercial banks are charged interest to keep cash with a nation's central bank, they are generally reluctant to pass negative rates onto their customers