ECB Held Nothing Back But Might Not Be Enough to Boost Economy

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.

via Reuters

This article 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 Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza