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At its June 5th meeting, the European Central Bank cut the main refinancing rate by 10 bps to 0.15 percent and the deposit rate to -0.1 percent, becoming the first major central bank to use negative interest rates.
Policymakers cut its benchmark refinancing rate by 10 basis points to 0.15 percent, starting from the operation to be settled on 11 June 2014. The interest rate on the marginal lending facility was also lowered by 35 basis points to 0.40 percent. But the big surprise was a 10 bps cut in the deposit facility to -0.10 percent, aiming to increase credit to the economy.
Extracts from Introductory statement to the press conference
"In pursuing our price stability mandate, today we decided on a combination of measures to provide additional monetary policy accommodation and to support lending to the real economy. This package includes further reductions in the key ECB interest rates, targeted longer-term refinancing operations, preparatory work related to outright purchases of asset-backed securities and a prolongation of fixed rate, full allotment tender procedures. In addition, we have decided to suspend the weekly fine-tuning operation sterilising the liquidity injected under the Securities Markets Programme.
The decisions are based on our economic analysis, taking into account the latest macroeconomic projections by Eurosystem staff, and the signals coming from the monetary analysis. Together, the measures will contribute to a return of inflation rates to levels closer to 2%. Inflation expectations for the euro area over the medium to long term continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2%. Looking ahead, the Governing Council is strongly determined to safeguard this anchoring. Concerning our forward guidance, the key ECB interest rates will remain at present levels for an extended period of time in view of the current outlook for inflation. This expectation is further underpinned by our decisions today. Moreover, if required, we will act swiftly with further monetary policy easing. The Governing Council is unanimous in its commitment to using also unconventional instruments within its mandate should it become necessary to further address risks of too prolonged a period of low inflation."
originally posted by: maddy21
Basically the ECB interest rate is in negative . So does that mean you will loose money on your deposits ? Maybe its time to go back to the old days were money were kept safe in safe houses inside the home ...
No for you or me not much will change, maybe the interest on the mortage can get lower but not much anyways, sure interest payment on your money will get bit lower as well but not negative..
The banks loans money at the central bank, so no rent for them lending money which they lend out again for much more interest (%).
edit on 5-6-2014 by Plugin because: (no reason given)
originally posted by: snarfbot
so you begin paying back principle immediately? and the bank gives a fraction of your payment back every month?