The European Central Bank will not move interest rates into “absurdly” negative territory and negative rates are not the bank’s main policy instrument even if further cuts can not be ruled out, Executive Board Member Benoit Coeure told Politico.
Although negative rates could reduce banks’ profitability, lenders actually increased their interest margins last year when the deposit rate was already negative and banks should feel reassured by the ECB’s latest moves, Coeure was quoted on Wednesday by Politico as saying.
The ECB unveiled an unexpectedly large stimulus package this month, cutting its deposit rate deeper into negative territory, increasing monthly asset buys by a third and offering free loans to the corporate sector to boost growth.
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