{"id":584,"date":"2014-06-06T06:41:14","date_gmt":"2014-06-06T06:41:14","guid":{"rendered":"http:\/\/www.asadkarim.co.uk\/?p=584"},"modified":"2014-06-06T06:41:14","modified_gmt":"2014-06-06T06:41:14","slug":"negative-interest-rates-and-the-ecb","status":"publish","type":"post","link":"https:\/\/www.asadkarim.co.uk\/?p=584","title":{"rendered":"Negative Interest Rates and the ECB."},"content":{"rendered":"<p>On Thursday 5th June 2014, the European Central Bank cut interest rates from 0.25% to 0.15%.<\/p>\n<p>[<a title=\"The European Central Bank\" href=\"http:\/\/www.ecb.europa.eu\/\" target=\"_blank\">http:\/\/www.ecb.europa.eu\/<\/a>]<\/p>\n<p>However the big news was the <strong>Deposit Facility Interest Rate<\/strong>, that was cut to:<\/p>\n<p><strong> -0.1%.<\/strong><\/p>\n<p>Yes, a negative interest rate.<\/p>\n<p>In the UK the base rate is 0.5%. This means, a UK clearing bank depositing money with the Bank of England gets 0.5% on cash that is deposited with the Bank of England.<\/p>\n<p>However in the Eurozone, this is now not the case, clearing banks operating in Europe, depositing money in the ECB will get an interest rate of -0.1%.<\/p>\n<p>So this is what will happen as a worked example:<\/p>\n<p>Friday 6th June 2014, a clearing bank depositing <strong>\u20ac1,000,000 Euros<\/strong> with the <strong>ECB<\/strong> get <strong>-0.1%<\/strong>, after 12 months of that <strong>\u20ac1,000,000 Euros<\/strong> on the deposit with the ECB will <strong>become \u20ac999,000<\/strong>.<\/p>\n<p>Yes, <strong>a loss of \u20ac1,000<\/strong>.<\/p>\n<p>The reality of this is a direct measure of the European Central Bank to force banks to lend. Thus the negative rate acts a <strong>disincentive<\/strong> to deposit cash with the ECB, and lend to businesses and consumers to help the European economy. Perhaps what this tells us the poor shape of the Eurozone economy.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>On Thursday 5th June 2014, the European Central Bank cut interest rates from 0.25% to 0.15%. [http:\/\/www.ecb.europa.eu\/] However the big news was the Deposit Facility Interest Rate, that was cut to: -0.1%. Yes, a negative interest rate. In the UK the base rate is 0.5%. This means, a UK clearing bank depositing money with the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-584","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.asadkarim.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/584","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.asadkarim.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.asadkarim.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.asadkarim.co.uk\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.asadkarim.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=584"}],"version-history":[{"count":1,"href":"https:\/\/www.asadkarim.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/584\/revisions"}],"predecessor-version":[{"id":585,"href":"https:\/\/www.asadkarim.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/584\/revisions\/585"}],"wp:attachment":[{"href":"https:\/\/www.asadkarim.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=584"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.asadkarim.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=584"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.asadkarim.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=584"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}