Will the ECB Go Negative?

image provided by paretory.files.wordpress.com
image provided by paretory.files.wordpress.com

Reuters Article

Global shares steadied on Friday after hitting record highs as investors positioned cautiously on the last trading day of the month, with the market’s focus on next week’s European Central Bank policy meeting.

[I]nvestors positioned to shield themselves from any disappointment from the ECB, which is widely expected to ease policy significantly on June 5.

My opinion: It’s hard to think that the ECB would take interest rates into the negative — meaning they are charging banks to deposit funds. But that may be the only move they can do. Aggressive liquidity policies in capital markets like the Fed’s quantitative easing program isn’t an appropriate option for the ECB. This is due to the fact that lending to companies in the EU is primarily done by banks and not capital markets like in the US.

So what is the solution? Some kind of ‘credit easing’. Or, in other words, an impetus that gets banks to loan more. Is that negative interest rates? Ehh.


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