Dismal Deposits

negative interest rateTo boost European economic activity, the ECB lowered the rate it pays banks that have deposits with it from -0.2% to -0.3%! These negative returns may encourage more lending, but I’m skeptical. It will, however, weaken the euro, boosting exports and inflation as imported goods rise in price. It will also dampen US interest rate increases as European investors buy Treasuries and in the process drive down their yields.

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