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?
Today, the Governing Council discussed the last remaining open issues regarding the ESCB’s minimum reserve system and confirmed that, first, the lump-sum allowance will be set at a level of 100,000 euros and, second, the reserve ratio will be set in the middle of the indicated range, i.e. at 2%.