Report
Clearly, the ECB does not believe that a long period of zero interest rates can have negative effects
After its Governing Council meeting on 7 March 2019, the ECB announced that there would be no rate hike before the end of 2019 and that there would be another TLTRO programme between September 2019 and March 2021. It is therefore likely that short- and long-term interest rates will remain extremely low in the euro zone. So the ECB does not believe that a long period of zero interest rates can have negative effects, even though recent economic literature shows that these effects exist: Weakening of banks, due to the flat yield curve and the resulting reduction in intermediation margins; Support for "zombie companies", inefficient companies that survive only thanks to the fall in interest payments on their debt; Persistent high taxes on lender households, which eventually shrink household demand. The fact that the ECB is not aware of the risks involved in keeping interest rate s at zero for a long time is worrying.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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