Households
3
The evidence clearly suggests that households take cues from negative rates to save more. This may be a hangover from the Great Financial Crisis. Household balance sheets suffered most in the GFC because the epicenter was a widely held private asset: housing. Domestic savings rates have been trending higher ever since. Rate cuts may also damage confidence with individuals worrying that they present a bad omen for growth, this has been a decent indicator in the past. A more subtle explanation for savings increasing with rate cuts, which may be more prescient for institutional investors, is the result of a present value calculation. At low, nil, or negative interest rates, in order to meet retirement goals you have to save more. Whatever the explanation households save more when rates falls, if rates fall below zero there is no reason to expect this relationship to change.