Expectations the ECB will “shock and awe” the market with a package of easing measures next month has pushed the euro lower, but some analysts worry one of those potential moves – a negative deposit rate – could backfire.
“The ECB has talked about it for the last 18 months,” said Mark Wall, co-head of European economics at Deutsche Bank. “It’s almost like they’re afraid to implement it. But they’ve waved it around like a loaded gun so often when it suited their purpose saying, ‘we could do this.'”
The deposit rate is already at zero. Many analysts expect a 10 basis-point cut in the rate, meaning the ECB would effectively charge banks for parking their money at the central bank rather than lending it.
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