The ECB believes the net effect of zero interest rates policy (negative in the case of the deposit rate) has been positive for the revenues of the different economic players. Although it’s true that the impact has not been equal, with the banking sector as a big loser, and some households as well, depending on the amount and interest rate structure of the debt.
Spain has been one of the countries which has benefited most from the ECB’s policy, particularly as far as our companies are concerned. The same is true, naturally, in the case of the Public Administrations. But the oustanding issue is if this policy, with obvious benefits in the short-term, has acted as a disincentive for the adjustment of public debt, which would explain its increase over the last decade.
Can we compare the impact of this policy with others implemented in the past? In the period 2002-2008, which includes both monetary easing and tightening, only the Public Adminstrations sector continued to benefit overall from the low interest rates scenario (increased duration of the debt portfolio). Others were adversely affected. This undoubtedly has a lot to do with the heavy indebtedness of companies and households in the final part of the period under consideration. In the banks’ case, during the monetary normalisation phase they recovered a good part of the revenues lost between 2002 and 2006
Of course at this moment it’s difficult to anticipate interest rates returning to average historic levels in the near future. The ECB anticipates low real interest rates from a historic perspective, assuming that inflation will also take time to reach the 2% target level.
As far as the banks are concerned, the recovery of financial income in the future will be explained more by a pick up in activity than by a scenario of high interest rates. But this doesn’t mean that interest rates won’t rise in the future.
