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- ECB unlikely to cut rate in pandemic fight, sources say
ECB unlikely to cut rate in pandemic fight, sources say
Reuters reports that five sources told that the ECB is unlikely to cut its already-record low policy rate as this would do little to revive the pandemic-hit euro zone economy.
The sources said Knot had raised the rate cut issue at the ECB's policy meeting last week but the discussion was "marginal" and not considered part of the ECB's policy strategy, which is now focussed on bond purchases and cheap loans to banks.
"Even if you see a much bigger appreciation, I would not infer that the unique answer to that is the interest rate," one of the policymakers said.
The sources noted that the ECB's focus now was on keeping financing conditions, i.e. bond yields and bank lending rates, stable, and said that the exchange rate was a secondary issue.
The sources added there were a number of reasons to oppose a rate cut: their limited impact on the real economy; the euro's exchange rate is still within its historical range; and the limited scope for making rates more negative before they start doing more harm than good.
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