© Reuters. The working space for Mario Draghi, President of the European Central Bank (ECB), will be prepared at the conference "The ECB and its Observers" in Frankfurt
. By Francesco Canepa and Balazs Koranyi
FRANKFURT (Reuters) – Facing mounting threats To growth, the European Central Bank may further delay a planned rate hike if it has to consider measures to mitigate negative interest rates, ECB President Mario Draghi said Wednesday.
The ECB has reversed the course previously month and postponed the plans to "normalize" the policy, instead providing banks with even more liquidity and postponing a rate hike to next year.
"As we did at our March meeting, we would ensure that monetary policy continues to support the economy by adjusting our interest rate targets to the new inflation outlook," Draghi said at a conference in Frankfurt.
With foreign demand plummeting, corporate investment has suffered, and there is a growing risk that domestic demand and employment will be affected, Draghi said. The ECB's new bank lending ̵
"TLTROs are a flexible instrument with a set of parameters that can be calibrated as needed to monetary policy at a given time," said Peter Praet, chief economist at the ECB.
In response to complaints from banks that negative interest rates are affecting banks' lending, Draghi said the ECB will examine whether mitigating measures are needed, but weak profits are not an automatic result of negative interest rates.
"If necessary, we need to think about possible measures that can sustain the beneficial effects of negative interest rates on the economy and, if necessary, mitigate the side effects," Draghi said. "However, low bank profitability is not an inevitable result of negative interest rates."
Some Northern European banks are in favor of a multi-tiered deposit rate, which would at least partially protect them from the additional costs of maintaining the surplus liquidity.
With a deposit rate of minus 0.4 percent, the ECB collects more than € 7 billion in fees a year from surplus liquidity. Praet said he had previously considered the benefits of a staggered interest rate, but policymakers said the council had not discussed the idea.
Draghi also seemed to reject the idea that banks need extra help. The best performing banks used the last decade to cut costs, diversify revenues, and invest in information technology.
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