Again, I don’t think this is the case today. Since the negative DFR has been introduced, the positive effects have dominated – the latest Bank Lending Survey has confirmed this. In particular, the effects related to the higher volume of loans and also the de-risking of the flows of new loans that are extended to the economy.
That’s because the economy is doing better, and that is good for the P&L of banks. Keeping the door open to further deposit rate cuts was one of the ways in which the ECB was trying to avert the risk of deflation. Now that risk has dissipated, so could this be the right time to rule out further rate cuts?