Slightly negative central bank interest rates ease financial conditions
Kerola, Eeva; Koskinen, Kimmo (12.11.2019)
JulkaisusarjaBank of Finland. Bulletin
JulkaisijaBank of Finland
Julkaisun pysyvä osoite onhttps://urn.fi/URN:NBN:fi:bof-201911131568
Negative interest rates have been an integral part of the ECB's overall monetary accommodation for just over five years now. The ECB lowering its deposit facility below zero has especially reduced the cost of market-based funding for banks and has been passed through to the real economy as lower interest rates on bank loans. Although low levels of interest rates do compress banks’ net interest margins, challenges to bank profitability in the euro area are largely related to long-term structural issues. Studies suggest that the benefits of negative interest rates outweigh their drawbacks.