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ECB to impose negative deposit rate in June

by David Campbell on May 21, 2014 at 07:20

ECB to impose negative deposit rate in June

The European Central Bank (ECB) is to move to a negative deposit rate at its meeting on 5 June according to leaked documents seen by German newspaper Der Spiegel.

The bank will also cut its main refinancing rate from 0.25% to a fresh record low of 0.15%, the paper reported.

But the move to charge an effective tariff of 0.1% on all funds deposited with the bank in an effort to spur lending and ease liquidity is the more significant move.  

Following effectively static Q1 GDP growth across the eurozone, the ECB is under increasing pressure to follow other central banks around the world down the path of unconventional easing measures.

Weak exports in particular have held back the pace of the recovery, with the strength of the euro making the continent’s goods relatively uncompetitive.

Der Spiegel added that the ECB would limit its approach for the time being, and would not discuss a move toward outright QE, in case deflationary pressures continue to rise.

Broad money growth in the Eurozone, as measured by M3, has continued to fall. After peaking at a recent high of 3.9% in October 2012 the measure fell back to 1.1% in March.     

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