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Breakingviews: Negative rates, positive action?

Monday, June 03, 2013 - 03:42

June 3 - Negative interest rates - the latest unconventional policy tool some are urging the ECB to use to fix the euro zone crisis. Should it? Yes, but only as a last resort, says Breakingviews.

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On today's breaking news have to make sense of the ECB's negative interest rate dilemma. Robert called what is breaking -- this -- an Anderson joins me now rob thank you so much for joining us on this topic this theory it's simple. Right ECB is going to charge banks. For stashing cash with that. Matt and -- fool -- to -- but it went black well I think. Let you know as part of a very well rounded third ruled. Come a sexist policies that is a chance that this sort of thing would help and and and could work but then things and he sort of guarantee. I think it's would be foolish to assume that on its open it would kick start the European economy. And I think even as a package of measures. One shouldn't go to patent assumed to mock chop off troll that. You know it is only an extension of lower interest rates it is -- an extension of the same -- policy this is seen as being printing money on -- raising liquidity and frankly you could site but without those policies things would have been a lot worlds but to most people you would think that actually these things. Happened was so yes right it's the next sensible thing to do but -- But but I'd I'd really done they would have -- should be happening and -- an -- so why hasn't ECB part of it well. Because it's a bit -- in the calls by Wanda. I mean there are some technical things -- for example. Banks have to pay for like a negative interest rates that kind of sort of since the computers and height wise is never done hopefully can I -- there's I don't know of those countries shouldn't shouldn't be ignored so it still technically. Technically difficult but that cups and I guarantee is it was suggested -- -- that -- this would welcome it would create some ground ramifications. Which you might might not be terribly. On which at present. So -- -- the ECB's in -- -- position that it would salute. Doesn't know who the -- also itself and appreciate the risks that come with it and how missiles I think that. If they told -- it -- out today. That might stall to get people to do what they wanted to move to get -- to do the heavy -- only without actually having to do well it is and that's that is lend animal while. My own view is that people will horrible when I have genuine -- now. And -- generally won't have to borrow more nothing appointment resilient and these are people feeling still vertical some very -- is that it will implement. It's also pretty interesting and and in the piece that some is appalled where it says actually. Negative interest rates might actually cool was the -- us. Absolutely it is one of those swung at one of those unintended consequences that you can't. You can't think no I didn't I mean in very very basic terms how does that work well if banks doesn't. Commercial banks. Doesn't borrowed. Sort deposit with the EC BE. Now are encouraged under some more lending fell lend but those projects that lend against will be by definition riskier. Risk -- sort of the risk is higher returns -- -- the interest rates could indeed -- which is the worst who. Rights very interesting indeed we have to leave it met my thanks to -- from breaking -- Vermont and assessing financial -- -- -- US breaking -- show it every day at twelve that -- -- sixteenth SE GM CI and you know long this is what is.

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Breakingviews: Negative rates, positive action?

Monday, June 03, 2013 - 03:42