Ewald Nowotny, a member of the ECB Governing Council said recently he was comfortable with the possibility of an increase in the deposit rate, from -0.4% to -0.2%, “as a first step” before any change in the official interest rate. At April 6, European banks kept 690, 384 million euros in the ECB. It’s the first time, since interest rates have been at a record low of 0%, that an ECB member has talked so clearly about a rise.
ECB rates hikes
Time has come to reassess the ECB’s strategy. The Central Bank can no longer overlook the economy’s marked improvement. Nor can it ignore the fact that the money market price is at lower levels than warranted by the current environment. It should act swiftly.
The certainty that we are on the threshold of a phase of consistent interest rate rises – the Fed could implement two or three further hikes this year – is spurring the European banks to endow themselves with liquidity from the ECB, at low prices.