The International Monetary Fund says that a move to negative rates by some of the world's central banks would help deliver extra monetary stimulus and ease lending conditions. Six of the world's central banks have introduced negative rates, most notably the Bank of Japan and the European Central Bank.
The IMF said Sunday that evidence so far shows negative rates have encouraged investors out of low risk government bonds while reducing borrowing costs for companies.
For banks, the picture was mixed, but the IMF said that in most cases, lending rates had fallen since the introduction of negative rates by central banks. That was despite a squeeze on net interest margins. The Fund warned, however, that there were limits to the effectiveness of negative rates.
The IMF said that if they remained negative for too long, cash settlements would rise, effectively undermining the policy.