ECB cut rates

[lucifir]

I see that the ECB has cut rates.

"The European Central Bank has cut interest rates to a fresh record low, lowering one of its benchmark rates below zero in a radical move that policy makers hope will help the currency bloc stave off the threat of deflation.
The ECB cut its main refinancing rate to 0.15 per cent, from 0.25 per cent, and its deposit rate from zero to -0.10 per cent, becoming the first major central bank to venture into negative territory"
http://www.ft.com/intl/cms/s/0/fd55...__/nbe/BreakingNews1/product&siteedition=intl

The deposit rate is now in negative territory!! anyone know what this means??

 

[Freshy-ZN]

Means banks now pay to keep their reserves in the ECB

 

[Sinbad]

I wish my bond was in the EU.

 

[lucifir]

Means banks now pay to keep their reserves in the ECB

as opposed to ??
surely that was always the case??

 

[Sinbad]

as opposed to ??
surely that was always the case??

Normally you earn interest on deposits. Now they are paying.

 

[lucifir]

Normally you earn interest on deposits. Now they are paying.

interesting, as surely banks would not keep any money there other than whats legislated, as they can earn more interest in the market. So basically this is forcing the banks to keep their money at the ECB as well as paying to keep it there

 

[Sinbad]

interesting, as surely banks would not keep any money there other than whats legislated, as they can earn more interest in the market. So basically this is forcing the banks to keep their money at the ECB as well as paying to keep it there

Well since the EU is trying to avoid deflation, they're trying to incentivise the banks to offer as much credit as possible to the clients in order to stimulate growth and keep the economy liquid.

 

[MKFrost]

Some major inflows into Australian dollar today. Guess that is where a lot of the funds went that left Europe today