The Federal Reserve will probably keep interest rates at zero when it meets this week. But its own ranks are increasingly clamoring for an unprecedented move: sending rates into negative territory.
In theory, negative interest rates would motivate more people and businesses to borrow money, which should stimulate the economy. Critics argue that negative rates would penalize people trying to save money, as well as the big banks by forcing them to make unprofitable loans. Fed Chairman Jerome Powell has repeatedly resisted pressure to slash interest rates below zero, even as central banks in Europe and Japan have gone negative.
Negative rates in Japan haven't led to an economic revival — that economy has remained relatively stagnant for the past three decades. Rates have been below zero in Europe since 2014, and that has hurt savers and created massive problems for giant European financial institutions such as Deutsche Bank .There are also legitimate concerns that negative rates will severely hurt profits for big banks in the United States. Rates below zero would squeeze the margins of banks' lending arms.
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