(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.
To contact the staff on this story: Jamie Murray (Economist) in London at jmurray126@bloomberg.net
To contact the editor responsible for this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net
©2019 Bloomberg L.P.