BERLIN (Reuters) – The European Central Bank has nothing new to say about instituting negative deposit rates, ECB President Mario Draghi said on Thursday, after a media report that the central bank was actively considering the move.
“Let me plead with you — don’t try to infer from what I say today anything on the possibility of negative rates on the deposit facility,” Draghi said in a speech at an event organized by German newspaper Sueddeutsche Zeitung.
“As I said at the press conference, this was discussed in the last monetary policy meeting and there is no news since then,” he said. “So let me make this clear: you know people tend to put things together and create their own dreams.”
Draghi said on November 7 that the central bank was “technically ready” for negative rates, if the economy warranted them. Those comments came at a news conference after the ECB cut its main refinancing rate to a record-low 0.25 percent and kept the deposit rate at zero.
The euro gained after Draghi’s signal that imminent action was unlikely, rising to a session high of $1.3477 against the dollar from $1.3435 before his comments. It traded at $1.3470 by 1210 GMT (7.10 a.m EDT)). German bond futures fell to a session low.
The comments came after the news agency Bloomberg said on Wednesday that the ECB was considering making banks pay to deposit cash overnight at the central bank. If the ECB went ahead, it would consider cutting the deposit rate to -0.1 percent, Bloomberg said, citing unnamed sources.
Also on Wednesday, a central bank official told Reuters the ECB, the national central banks for euro zone countries and corporate lenders have all adjusted their internal systems to cope with negative deposit rates should they come.
“But in contrast to the spring, when such an option was heavily debated, the appetite for this has waned recently,” the official said.
Cutting the deposit rate below zero would take the ECB into uncharted waters. It would effectively charge banks for holding money at the ECB.
In Thursday’s speech, Draghi also said the ECB’s rate cut was meant to restore a margin of safety against deflation rather than signaling that the risk of deflation could materialize in the euro zone.
Draghi said the ECB had seen “slow motion” disinflation for months, which combined with a weak economy, meant a prolonged period of low inflation was likely.
(Reporting by Stephen Brown, writing by Sakari Suoninen- Editing by Larry King)
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