Draghi Says ECB's Negative Rates Have Been a Success
By Jason Douglas
WASHINGTON -- European Central Bank President Mario Draghi said Thursday the central bank's negative interest-rate policies haven't hurt bank profitability as critics suggested they would.
Mr. Draghi also reiterated the ECB's guidance that asset purchases would continue until officials see a sustained improvement in the outlook for inflation, and that interest rates would remain at current levels "well past" the time it stops buying assets.
In June 2014, the ECB moved the interest rate it pays to banks that park money with it into negative territory, effectively charging banks to leave cash on deposit. It subsequently cut it three more times, to its current level of minus 0.4%.
Critics have called the move counterproductive as it could squeeze bank profits, but Mr. Draghi said Thursday the profitability of European banks has been increasing and is forecast to increase further as the eurozone's economic recovery continues.
"By and large our negative interest-rate policies have been a success," Mr. Draghi said at the Peterson Institute for International Economics. "We haven't seen the distortions that people were foreseeing. We haven't seen bank profitability going down; in fact it is going up."
He added the policy hasn't hurt money market-funds either, another predicted consequence. The money flowing into such funds, which park investors' money in cash and short-term debt securities, has been increasing, Mr. Draghi said.
Mr. Draghi signaled in September that the bank probably would announce plans for the future of its asset-purchase program after its next policy meeting Oct. 26.
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