Talk Money: February 22

Tony Field (Paul Henry)
Tony Field (Paul Henry)

You might have heard of negative interest rates? They have them in Japan and many European countries.

What is happening there could have an impact here.

Banks in Japan and Europe have to pay interest if they want to store their surplus cash with their central banks.

The idea is that this will encourage the commercial banks to instead lend more cash to businesses and people, encouraging growth.  The theory is that the banks will also cut their customers' deposit rates, forcing them to invest elsewhere in assets like stocks.

Those lower deposit rates will encourage investors to look for better returns elsewhere. That is likely to see them pour more money into New Zealand, driving up the value of the Kiwi.

A higher dollar is likely to put more pressure on our Reserve Bank to cut the Official Cash Rate.

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