Lane Says New Normal for ECB Interest Rates Is Positive Yet Low

(Bloomberg) --

The new normal for European Central Bank interest rates ranges somewhere between zero and 3%, according to Chief Economist Philip Lane.

“I’m confident that as the euro-area economic recovery is completed, interest rates will come back to positive territory,” Lane told an audience in Berlin. “The new normal will be positive but low.”

In Germany, the current level of interest rates is a constant topic of complaint. With commercial banks increasingly passing on the ECB’s negative deposit rate to their customers, criticism has mounted that loose monetary policy is hurting savers.

Lane expressed confidence that low rates today -- the ECB’s deposit rate is currently at minus 0.5% -- will allow policy makers to raise borrowing costs in the future. Once the region’s recovery is achieved, interest rates could be between 2% and 3%, he said.

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