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The European Central Bank (ECB) is considering a smaller-than-normal cut in the deposit rate if officials decide to take the interest rate negative for the first time, according to two people with knowledge of the debate.

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ECB Weighs Adopting Negative Interest Rate for Deposits

The European Central Bank (ECB) is considering a smaller-than-normal cut in the deposit rate if officials decide to take the interest rate negative for the first time, according to two people with knowledge of the debate.

ECB Weighs Adopting Negative Interest Rate for Deposits (Bloomberg)

The European Central Bank (ECB) is considering a smaller-than-normal cut in the deposit rate if officials decide to take the interest rate negative for the first time, according to two people with knowledge of the debate. Policy makers would reduce the rate for commercial lenders who park excess cash at the ECB to minus 0.1 percent from zero, said the people who asked not to be identified because the talks arenâ??t public. It would be the first time the central bank has adjusted interest rates by less than a quarter of a percentage point. The concept, which has been discussed by Governing Council members, doesnâ??t yet have a consensus, the people said. Members of the council, which is holding a mid-month meeting in Frankfurt this week, have said that a negative deposit rate is a potential tool for warding off deflation. Theyâ??ve also cautioned that the consequences of such an unprecedented measure arenâ??t clear. The central bank this month refrained from cutting the deposit rate even as it reduced its benchmark lending rate to a record low of 0.25 percent

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Paul Dykewicz is the editorial director of the Financial Publications Group at Eagle Publishing Inc., www.eaglepub.com, of Washington, D.C. Eagle publishes five free, e-letters, 10 weekly trading services and five monthly investment newsletters, Forecasts & Strategies, Successful Investing, Cash Machine, Growth & Dividend Report and The Alpha Investor Letter. He also is the editor of Eagle Daily Investor and the author of the inspirational book, "Holy Smokes! Golden Guidance from Notre Dame's Championship Chaplain."

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ECB Weighs Adopting Negative Interest Rate for Deposits

ECB Weighs Adopting Negative Interest Rate for Deposits (Bloomberg)

The European Central Bank (ECB) is considering a smaller-than-normal cut in the deposit rate if officials decide to take the interest rate negative for the first time, according to two people with knowledge of the debate. Policy makers would reduce the rate for commercial lenders who park excess cash at the ECB to minus 0.1 percent from zero, said the people who asked not to be identified because the talks aren’t public. It would be the first time the central bank has adjusted interest rates by less than a quarter of a percentage point. The concept, which has been discussed by Governing Council members, doesn’t yet have a consensus, the people said. Members of the council, which is holding a mid-month meeting in Frankfurt this week, have said that a negative deposit rate is a potential tool for warding off deflation. They’ve also cautioned that the consequences of such an unprecedented measure aren’t clear. The central bank this month refrained from cutting the deposit rate even as it reduced its benchmark lending rate to a record low of 0.25 percent

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