No Negative Rates in Euroland (yet)

Today, the ECB decided not to continue their decrease in interest rates implemented on May 8. All rates remained unchanged, so no new territory was explored. In particular, deposit rates remain at zero, so no negative rates were implemented. Apparently the 0.25 basis point cut on main refinancing operations in May was considered sufficient.

It just seem a bit “to little to late” in the current situation, when the ECB simultaneously revised output projections downwards, and stressed that the risks are on the downside. Draghi emphasized at today’s press conference that no measure was set aside permanently, thereby signaling that a further cut cannot be ruled out. He also did offer, in my interpretation, some sort of “forward guidance” on interest rates by stating that the accommodative stance of monetary policy would be maintained as long as necessary.

That latter part is in all likelihood meant as expansive, but I would have imagined that such a non-standard measure should take place when the conventional measures are outplayed. A prolonged recessionary stance such as the one Euroland has been experiencing seems the adequate time to “go all in” with your conventional tools if there ever was one. In other words, I would think that they should have cut more and earlier.

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