The European Central Bank is giving euro zone banks a small reprieve from a penalty charge on their idle cash but this is likely to prove too little, too late for a sector hurt by years of low interest rates.
In its latest bid to shield the euro zone’s economy from a global economic slowdown, the ECB pushed its deposit rate further below zero on Thursday – effectively increasing how much it charges banks for keeping their excess cash overnight.
It was part of a package that also included a pledge to buy assets and keep rates low or even cut them until inflation returns to the ECB’s target of just under 2 percent.
To cushion the latest blow to an already ailing industry, the ECB introduced a so-called tiered system of interest rates whereby a portion of bank deposits, currently set at six times their mandatory reserves, is exempted from the charge.
But the size and design of the scheme, inspired by one used by the Swiss National Bank, left observers underwhelmed.
Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at email@example.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.