<p>A negative interest rate environment is a macroeconomic scenario where central banks set interest rates below zero. In such an environment, instead of earning interest on their deposits, banks pay to keep their money with the central bank.</p>

<h2>How It Works</h2>
<p>Central banks use negative interest rates as a monetary policy tool to stimulate economic growth. Here's how it works:</p>
<ul>
  <li>Central banks set their policy rate below zero.</li>
  <li>Commercial banks are charged for holding excess reserves with the central bank.</li>
  <li>Banks pass on these costs to their customers by offering low or negative interest rates on deposits.</li>
  <li>This encourages businesses and individuals to borrow and spend, rather than save.</li>
</ul>

<h2>Why It Matters</h2>
<p>Negative interest rates have significant implications for both businesses and individuals:</p>
<ul>
  <li><strong>Borrowing Costs:</strong> Low or negative interest rates reduce borrowing costs, making it cheaper for businesses to invest and expand, and for individuals to take out loans.</li>
  <li><strong>Savings and Investments:</strong> Negative rates can discourage saving and encourage investment in riskier assets, potentially leading to increased market volatility.</li>
  <li><strong>Currency Value:</strong> Negative rates can weaken a currency's value, making a country's exports more competitive internationally.</li>
</ul>
<p>For instance, the European Central Bank implemented negative interest rates in 2014 to combat low inflation and stimulate economic growth. This policy has had a significant impact on the European economy, influencing borrowing costs, savings behavior, and currency exchange rates.</p>