Negative interest rates turn saving, borrowing upside down

FRANKFURT, GERMANY » Imagine a mortgage that pays you the interest, not the other way around. Or a savings account where it’s the bank, not the saver, who collects interest.

Welcome to the upside-down world of ultra-low and negative interest rates that is taking hold in many parts of the world where economic growth has been sluggish. Now more than a decade old, economists think it could be a feature of the global economy for years to come and change the way people save and invest.

“This will mean that we must save more, work longer, and expect less,” said Olivia Mitchell, an economics professor at the Wharton Business School at the University of Pennsylvania.

The latest chapter is the drop in interest rates on some bank deposits below zero as central banks, particularly in Europe and Japan, try to support the economy amid uncertainty about trade by making borrowing cheaper to spur spending and investment. Official data released Friday showed that Germany’s growth ground to a halt at the end of last year.

Economists think there are also longer-term factors causing low rates, such as aging populations in rich countries and high rates of savings in China and other emerging economies.

Low rates first hit in the wake of the global financial crisis. The U.S. Federal Reserve, Bank of England, Bank of Japan, and European Central Bank slashed rates close to zero. In 2014, the ECB went negative.

Ultra-low rates have helped push up stock markets to record highs, as vanishing returns on safe assets lead to a search for returns elsewhere. Pushing people to invest in riskier assets is part of the stimulus effect central banks are trying to impart. But there are also fears that very low rates can cause markets to bubble up, and crash back down with painful consequences. So far, the dire predictions haven’t come true. The current bull market in U.S. stocks turns 11 years old on March 9.

JEAN-FRANÇOIS BADIAS — THE ASSOCIATED PRESS Christine Lagarde president of the ECB warns that the world’s central banks have little room to stimulate growth in the economy as interest rates and inflation are already very low.