Economics
ECB’s Stealth Rate Cut Lures Banks to Fund Virus-Hit Economy
- Institution drops rate on long-term loans to as low as -1%
- Measures give banks incentive to buy more bonds, boost lending
This article is for subscribers only.
The European Central Bank’s surprise tweaks to monetary policy amount to an effective interest-rate cut that puts banks on the frontline of the euro area economic recovery.
The move to start a new source of funding and lower the rate on long-term facilities designed to promote lending will probably ease the stress in Europe’s money markets. And banks, which have been hoarding cash, could then boost lending and ramp up their bond buying to use as collateral for more ECB funds.