European Central Bank Monitors Impact Of its Anti Deflationary Measures!

European Central Bank is unlikely to take new policy moves at its monthly meeting next week. Instead it is being reported that the European Central Bank (ECB) is still monitoring the impact of its ant deflationary measures that it took last month. Last month, ECB took the unprecedented step of making the deposit rates negative for the first time. Deflation is a big concern for the European economy right now. Students of economics know that there is always a time lag before the monetary policy change starts showing results. In case of interest rate changes it can take at least six months for the interest rate change to trickle down throughout the whole economy.

At its June meeting, the ECB entered uncharted waters, taking one of its key interest rates into negative territory for the first time. It lowered its benchmark refinancing rate to 0.15 percent and cut the deposit rate, the rate at which the central bank pays commercial banks for depositing their unused cash, to minus 0.10 percent.

 

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