Interest rates could be going even lower in the Eurozone, the European Central Bank has said
Interest rates in Europe could sink even further into negative territory over the next few months, the European Central Bank (ECB) confirmed yesterday, as it said that it would keep all options on the table in its fight to stave off deflation in the Eurozone.
Minutes from last month’s monetary policy meeting, where ECB president Mario Draghi announced a cut in the central bank’s deposit rate - the amount it pays, or charges, banks to lodge their cash with the ECB overnight - from minus 0.3 to minus 0.4 per cent, confirmed that the ECB did “not rule out the possibility and prospect of further cuts”.
“The ongoing recovery in the euro area economy remained weak and fragile,” the Bank said, arguing that Europe “continued to be rather vulnerable to adverse shocks.”
Draghi reiterated these concerns in the ECB’s annual report, also released today. He wrote, “we face uncertainty about the outlook for the global economy … and we face questions about the direction of Europe and its resilience to new shocks”.
A sharper drop in interest rates was considered in March’s meeting, but ultimately rejected as the ECB deemed its latest package of reforms, which included extending its bond-buying quantitative easing programme from €60bn (£48bn) to €80bn a month, “could be judged as appropriate for now”....MORE