negative rates risk

Negative inflation rates can depress growth as falling prices induce consumers to postpone purchases – a situation that Japan experienced for many years. In addition, when prices are rising, purchasing power is transferred from lenders to borrowers.

Borrowers are effectively able to repay less than what they originally borrowed. But deflation increases the real value of debt. This is particularly problematic in the Eurozone where many countries have high debt burdens.


Published by mikebertelsen

Global market, trade, and financial news. I keep up to date with what I assess is important.

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