UK Accounting Glossary
A zero interest rate policy or zirp is a route taken by a central bank to keep the base rate at zero per cent in an attempt to stimulate demand in the economy by making the supply of money cheaper. The term is also used to describe a near-zero benchmark rate set by countries such as the UK in the post-financial crisis years, which kept interest rates near to zero and accompanied that policy with measures such as quantitative easing.
In July 2012 the media returned to a theme in which it argued against zirp policies. It argued such a rate policy could have a disastrous impact on collateral markets and money market funds, not to mention the net interest income of lending institutions. All of which could unleash a protracted deflationary spiral.
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This glossary post was last updated: 13th February 2020.