Interest rates may become even more negative in the euro zone, and this may slow down its growth

The ECB will probably lower the interest rate on bank deposits at the central bank in September 2019. This will, via arbitrage, lead to a further fall in interest rates on euro-zone government bonds and on interest rates on loans in the zone. This development may trigger mechanisms that will weaken euro-zone growth: A rise in the household savings rate if income effects (maintaining the income from savings) dominate; A lack of positive effect on corporate investment if the demanded return on equity (the RoE) does not fall; Even if there is a tiering of banks’ excess reserves, a weakening of banks due to the fall in interest rates on loans.