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20 Nov 2013
Increased speculation of a negative ECB deposit rate
FXstreet.com (London) - There has been further speculation that the European Central Bank is considering the implementation of negative deposit rates.
The move would reduce the ECB deposit rate for commercial lenders from zero to -0.1 percent, in effect charging banks for holding a liquidity cushion. It would be hoped that the move would push commercial banks to lend to businesses and households – something that has been heavily depressed within the Eurozone.
The speculation comes during the ECB governing council’s mid-week meeting in Frankfurt.
Earlier this month ECB president Mario Draghi said that the bank was ready to implement the measures if the economic outlook supported it.
Any such move to further loosen ECB policy would be controversial. The ECB cut its main refinancing rate earlier this month by 25 basis points to a record 0.25 percent against a backdrop of a Eurozone facing relative deflationary pressures and soaring unemployment.
Inflation numbers for October significantly undercut expectations, printing at just 0.7 percent for the Eurozone. The area’s economy grew by just 0.1 percent last quarter while unemployment is at 12.2 percent.
The move would reduce the ECB deposit rate for commercial lenders from zero to -0.1 percent, in effect charging banks for holding a liquidity cushion. It would be hoped that the move would push commercial banks to lend to businesses and households – something that has been heavily depressed within the Eurozone.
The speculation comes during the ECB governing council’s mid-week meeting in Frankfurt.
Earlier this month ECB president Mario Draghi said that the bank was ready to implement the measures if the economic outlook supported it.
Any such move to further loosen ECB policy would be controversial. The ECB cut its main refinancing rate earlier this month by 25 basis points to a record 0.25 percent against a backdrop of a Eurozone facing relative deflationary pressures and soaring unemployment.
Inflation numbers for October significantly undercut expectations, printing at just 0.7 percent for the Eurozone. The area’s economy grew by just 0.1 percent last quarter while unemployment is at 12.2 percent.