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Cash Hoarding Is Eventual Restraint to ECB Rate Cuts
Cash Hoarding Is Eventual Restraint to ECB Rate Cuts
05 Jul 2019, 04:42 PM IST
(Bloomberg) -- The European Central Bank has cut the deposit rate to -0.4% and Bloomberg Economics expects that rate to be cut by a further 10 basis points in September. As a firefighting tool, rate cuts are compromised -- tiering would probably be needed for big moves and that may even impede transmission of policy. Then, at some as yet unknown point, cash hoarding would become the binding constraint: As deposit rates have fallen there’s already evidence of this in ECB data on the volume of cash held in bank vaults -- though it’s currently in small quantities.
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