European Central Bank interest rates, already deep in negative territory, could ...
The logo of the European Central Bank is pictured outside its headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach
A paper, which does not necessarily represent the ECB’s opinion, showed that even at minus 1%, the ECB would still not hit the so-called reversal rate, where bank lending starts to contract and rate cuts become counterproductive. “In fact, lower overnight interest rates are associated with stronger loan growth,” the paper said after modeling several deposit rate cuts, including to minus 1%.
Although the 335-page paper was written by staff, the effort was led by Massimo Rostagno, the head of the ECB’s monetary policy decision, a key player in preparing Governing Council decisions and one of the architects of past stimulus measures.
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