I’m very new to forex and trading in general and recently I’ve been studying global macro economics concepts, with Interest Rates in particular.
My question (which I hope isn’t too dumb) is the following:
When we talk about a country’s Interest Rates, it’s generally the Overnight Rate (or Fed Funds Rate in the US), which (from my understanding) is the rate that commercial banks charge each other in order to meet their reserve requirements set by the Central Bank.
The problem arose when I was studying how the negative interest rates work in Japan and what I understood is that their negative rate is regarding the rate that the bank pays the commercial banks to deposit their excess liquidity. By doing this, the BoJ is encouraging the commercial banks to lend their excess funds to the economy, instead of leaving it parked on the central bank’s safe.
I hope I’m managing to explain myself but my doubt is if the “general” interest rates means different things in different countries. Because what i’ve understood (from what I wrote in this post) is that in Japan we’re talking more about a deposit interest rate regarding excess liquidity, rather than the rate that commercial banks charge each other to meet their reserve requirements…
If anyone could help me make sense out of this thing, I’d be immensely grateful.