A Negative Interest Rate Policy (NIRP) is an unconventional monetary policy tool in which a central bank sets its target nominal interest rate at less than zero percent. The goal of NIRP is to encourage borrowing, spending, and investment rather than hoarding cash.There are a few potential benefits of NIRP. First, it can help to stimulate the economy by encouraging lending and spending. Second, it can help to reduce unemployment by making it cheaper for businesses to borrow money for expansion or new hiring. Finally, NIRP may help to prevent deflationary spirals by making it more attractive for people and businesses to hold onto cash.However, there are also some risks associated with NIRP. One risk is that banks may become reluctant to lend money if they think that borrowers will struggle to repay their loans due to low economic growth or high inflation rates. Another risk is that savers could be discouraged from keeping their money in banks if they believe that negative deposit rates will eat into their savings balances over time.
