ECB Tiering Is Likely to Exempt 30% of Excess Reserves From Negative Rates
Bloomberg Economics expects the European Central Bank to introduce a major stimulus package this week, including relaunching quantitative easing with purchases of 45 billion euros ($50 billion) a month in bonds for one year, a 10 basis point reduction in the deposit rate and the introduction of a tiering system. That setup would reduce the cost of the additional excess reserves created by the bond purchases and of moving the deposit rate further into negative territory. BE’s core scenario is for the ECB to exempt 30% of excess reserves from the deposit rate via tiering.
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