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- ECB needs convincing to try to mitigate effect of negative rates, ECB chief economist
ECB needs convincing to try to mitigate effect of negative rates, ECB chief economist
The European Central Bank’s chief economist says there needs to be a solid monetary-policy case before officials act to mitigate side effects of negative interest rates on banks.
ECB staff are examining the issue of tiering -- where some of banks’ excess reserves are exempt from the lowest rate -- but action isn’t a done deal, Peter Praet said.
“For tiering, we need to be convinced that it would address a monetary-policy question in an efficient way,’’ he said. “We have to be ready for all the possible instruments that we could use.’’
“The perspective of low rates for longer has triggered the debate about the side effects of a negative rates,” Praet said. “When you look at the economy today and the lending channel, we don’t see any particular problem,” but “with the weakening economy, it may happen in the future. So you have to be ready.”
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