FRANKFURT (Reuters) - The European Central Bank would need the inflation outlook to worsen significantly for another rate cut, but pushing rates deeper into negative territory remains an option, Peter Praet, the bank’s chief economist told a Spanish newspaper.
“Deploying negative rates again in the future would require a distinct worsening of the inflation outlook,” Praet told Expansión in an interview. “I don’t think we’re going to see these conditions materializing in the near future.”
“Since negative rates were introduced in 2014, they have been very effective,” said Praet, who also sits on the ECB’s executive board. “So far, the positive effect of an improvement in financial conditions outweighs any negative effects that may be associated with banks’ earnings capacity or other financial stability risks.”
Struggling with ultra low inflation, the ECB cut its deposit rate to -0.4 percent in March to force cash parked with the bank into the real economy to generate growth and inflation.
Reporting by Balazs Koranyi