This economic policy can have a significant impact on your personal finances. The Fed can technically drop interest rates below zero, creating negative interest rates or sub-zero interest rates.

What happens when interest rates are near zero?

Despite low returns, near-zero interest rates lower the cost of borrowing, which can help spur spending on business capital, investments and household expenditures. ... Banks with little capital to lend were hit particularly hard by the financial crisis. Low interest rates can also raise asset prices.

Can interest rates go negative?

A negative interest rate occurs when the percentage of interest on an account drops below zero. A bank account balance with a positive interest rate — above 0% — grows as the bank pays interest. But with a negative interest rate, the bank could actually charge interest and decrease the balance.