View of the ECB headquarters in Frankfurt last January.Kai Pfaffenbach / Reuters
Denmark was the first country to rattle the cat.
It was 2012 and its central bank was apparently launching itself into the void, putting the price of money below zero.
It was an almost desperate move to boost credit, revive inflation and boost growth amid increasingly languishing prospects across the advanced world.
The apparent anomaly of charging for borrowing and paying for deposits was finally taboo.
And it gave free rein to all kinds of speculation and rivers of ink, especially negative ones: even the Bank of America - one of those that sets the agenda in the financial world - warned of the "great concerns" that the measure aroused in the countries rich.
With the perspective that allows almost a decade, the technicians of the International Monetary Fund (IMF) deny the greater.
“Eight years later, the initial skepticism has largely proven out of place.
The evidence suggests, so far, that negative interest rate policies have worked, ”five economists from the Washington-based agency's research department conclude, leaving little room for doubt in a study published Wednesday.
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Denmark was the one who took the lead, yes, but far from left alone in their crusade.
In a matter of months, years at the most, a good number of first-rate issuing institutes followed in his footsteps: the Swedish Riksbank, the Swiss National Bank or two heavyweights, the European Central Bank (ECB) and the Bank of Japan.
Thus, powerful cases of analysis were added to see if negative reference rates were a 21st century madness or another instrument to take into account in the always complex monetary policy toolbox.
Everything seems to point to the latter: "In general, this policy has eased financial conditions and, probably, has supported growth and inflation", remarked the signatories of the investigation, Luís Brandão-Marques, Marco Casiraghi, Gaston Gelos, Günes Kamber and Roland Meeks.
IMF technicians acknowledge that negative rates "remain controversial," but not so much because of their real effects on the engine room of the economy - the ten plagues of Egypt that some predicted were far fewer - but because "they are often they misunderstand ”.
Intuition rowed (and continues to row) in the opposite direction, and several questions floated in the air: from what moment does it make sense to charge, and not pay, for a mortgage, as has happened in Denmark itself ?;
Would there be a massive movement towards cash, to avoid having to pay for what is deposited in current accounts or in long-term savings instruments ?;
Would it really serve to relaunch the economy?
“These fears have not materialized.
Negative interest rate policies have demonstrated their ability to stimulate inflation and GDP, at least as much as conventional rate cuts or other unconventional monetary policies ”, they respond in an entry on the institution's blog in which they present the main conclusions of his work.
One of the main objectives of the measure - to boost credit - has been fulfilled, according to the Fund's economists.
“In general, the volumes lent by banks have increased.
And while neither they nor their customers have shifted sharply to cash, interest rates may be even more negative before that happens.
So far everything is going well ”.
The conclusions of the study coincide with the diagnosis that the current Italian Prime Minister, Mario Draghi, made in October 2016, when he was still in charge of the Eurobanco: negative interest rates, he said, "work."
"Limited" impact on the financial system
Financial institutions welcomed negative interest rates as unmitigated bad news, which also came at a particularly difficult time: their traditional business model was beginning to disintegrate in an increasingly digital environment.
Eight long years later, however, "their benefits have not been impaired [by the measure], although those that relied most on deposit funding, as well as some smaller and specialized entities, have suffered more."
That is not the case, however, of the big banks, "which have increased their loans, put commissions on deposit accounts and benefited from capital gains."
Neither does risk taking by banks, one of the potential risks of the decision, "appears to be excessive."
"So far, the adverse effects on bank results and on financial stability have been limited," remarks the document published this Wednesday.
The statement has double value because it comes from where it comes from: the Monetary Fund itself was one of the organizations that raised its voice very shortly before Draghi made a closed defense of the measure, warning that it would "damage" the income statements of the banks.
Almost five years later, and in light of the results obtained by the agency's technicians, it can be said that those fears were exaggerated.
In light of this series of conclusions on one of the monetary policy decisions that has most transcended the general public and that has sparked the most debate in recent years, the IMF's own technicians wonder why not more central banks have risen to the boat of negative types.
Something that, they believe, has to do with "legal and institutional limitations" and with the greater presence in some countries of small banks, which depend to a great extent on family deposits for their funding, which leads them to be more reticent when taking the step.
"In sum, the evidence available so far indicates that negative interest rate policies have been successful in improving financial conditions without creating significant concerns for financial stability," the authors conclude.
“Central banks that have already adapted them could reduce them even more.
And those who have not, should not rule out adding a similar measure to their potential toolbox, even if they are unlikely to use it: many may be forced to use it sooner or later. "