# Zero Interest Rates

**Zero interest rates** are a type of financial policy that is used by central banks, which are special organizations that manage the money and banking systems of countries. When a central bank sets a zero interest rate, it charges zero percent interest on the money it lends to banks and other financial institutions.

Interest is a fee that is charged on a loan or a credit card balance, and it is usually expressed as a percentage of the amount that is borrowed or owed. For example, if you borrowed $100 from a bank and the bank charged 10% interest, you would have to pay the bank $110 in total (the $100 you borrowed plus the $10 interest).

Zero interest rates are sometimes used during economic downturns or times of financial crisis when the central bank wants to encourage banks and other financial institutions to lend more money to people and businesses. By charging zero interest, the central bank hopes to encourage more borrowing and spending, which can help to stimulate the economy.

### See Also

Zero interest rates refer to the prevailing condition in a monetary policy where the central bank sets its benchmark interest rate at or close to zero percent. Here are five semantically related terms to zero interest rates:

- Central Bank Policy: Central bank policy refers to the actions and decisions taken by a country's central bank to influence economic conditions, including interest rates, money supply, and inflation. Zero interest rates are often implemented as a monetary policy tool to stimulate economic growth and encourage borrowing and investment.
- Monetary Policy: Monetary policy is the set of actions and tools a central bank uses to control the money supply, interest rates, and credit conditions in an economy. Zero interest rates are considered an unconventional monetary policy tool to support economic recovery during periods of low growth or recession.
- Quantitative Easing (QE): Quantitative easing is a monetary policy tool central banks use to stimulate the economy by purchasing government securities or other financial assets in the open market. QE is often implemented alongside zero interest rates to lower long-term interest rates and boost economic activity.
- Negative Interest Rates: Negative interest rates occur when central banks set their benchmark interest rates below zero, charging commercial banks for holding excess reserves. Negative interest rates are an extreme form of monetary policy used to stimulate lending and discourage saving during deflation or economic stagnation periods.
- Yield Curve: The yield curve represents the relationship between bond yields and their respective maturities. Zero interest rates may flatten or invert the yield curve, leading to changes in borrowing costs, investment decisions, and market expectations about future interest rates and economic conditions.
- Financing