ECB Members Become More Vocal Against negative rates, After Draghi Leaves the Room
ECB lowered deposit rates further to -0.50% in September, but now ECB members don't seem to content with it
Skerdian Meta•Tuesday, December 3, 2019•2 min read
The European Central Bank has been keeping negative interest rates for a long time. They decided to cut deposit rates further by 10 basis points, to -0.50% in September, which was the last thing Mario Draghi did as the president of the ECB, apart from starting another quantitative easing (bond purchase) programme.
ECB members seemed to agree with that back then, but now we are hearing increasing comments from them about the negative effects of negative rates. The Eurozone area finance ministers are also piling up on this. Below are the recent comments emphasizing their issues.
Comments by ECB governing council member, Pablo Hernandez de Cos:
- September stimulus package is to support reaching inflation objective
- But maintaining low interest rates for longer could hurt banking transmission channels of our monetary policy
- Prolonged period of low interest rates could threaten financial stability
ECB’s Visco:
- Negative interest rates have little effect
- Negative rates can have negative side effects on the financial system
- Prefer bond purchases over negative rates
Bloomberg reports, citing people with knowledge within the ECB:
According to the report, the ECB is facing increasing pushback against their negative interest rate policy in private engagements with the region’s finance ministers.
Adding to that some euro area finance chiefs are challenging the ECB’s stance during confidential discussions on the economy, complaining about its detrimental impact on savings and pension systems, according to people familiar with the situation.
So, it seems that ECB officials and European finance officials are raising their voice now in disdain, which shows that Mario Draghi had a a strong hand at the ECB. This also tells us that the new ECB president Christine Lagarde is going to have some headaches in rallying ECB members behind her whenever she wants to take action. This is positive news for the Euro on the short term, but not so for the Eurozone economy.
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Skerdian Meta
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Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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