FRANKFURT • European Central Bank (ECB) officials lack enthusiasm for any revamp of their negative-interest rate tool — and some doubt it will actually happen when an analysis of the policy is completed, according to people with knowledge of the matter.
ECB policymakers aren’t opposed to president Mario Draghi’s move to examine the impact of the measure, but many don’t yet see merit in a switch to so-called tiering to exempt some bank excess reserves from the deposit rate, said the people.
They didn’t want to be identified because such discussions are confidential. In the meantime, the euro pared its decline on the news.
The currency was little changed at US$1.1298 (RM4.68) as of 12:36pm Frankfurt time yesterday, having earlier been as low as US$1.1280.
Among various motivations for keeping the status quo are a reluctance to damp the effect of the existing tool, worries about the possibility of signalling future rate cuts, and concerns that the ECB is becoming held responsible for the profitability of lenders, the people said.
The combination of inertia and hardening Opposition to change in the ECB’s sub-zero monetary policy is emerging in the aftermath of an inconclusive meeting last week.
Policymakers committed only to analyse the matter as a follow-through from Draghi’s surprise call to “reflect” on a potential revamp.
The ECB’s deposit rate, currently at minus 0.4%, has been below zero for nearly half a decade. — Bloomberg