The remuneration on ES balances is currently 10 basis points, the three-year yield target is at 25 basis points and the borrowing rate of the TFF is also 25 basis points. It is possible to further reduce these interest rates. A fourth option is negative rates. The Governor has talked about this before. [11] I will just make a few points here.
The empirical evidence on negative rates is mixed. [12] In the short-term, they can contribute to a lower exchange rate. In the medium term, the effectiveness can wane including through the effect on the financial system.