ECB will not take rates into 'absurdly negative territory', says Coeure

Although further cuts to interest rates cannot be ruled out, the European Central Bank will not take rates into “absurdly negative territory", executive board member Benoit Coeure said in an interview with Politico published on the central bank’s website.

Coeure told Politico that negative interest rates were not the ECB’s main instrument, they just support its overall policy.

“And looking ahead, we’re not short of instruments – our choice is quite large. We will be able to deal with adverse situations if necessary.”

Coeure said the profitability of banks has improved when you look at the global overall impact of monetary policy, i.e. stronger credit demand and lower risk in the economy. He added that banks’ interest margin has gone up, not down.

“Of course, the impact is different depending on banks’ business models and on how negative the rates are,” he said.

Coeure also stressed that the bank’s job was to bring inflation back to its near-2% target.

“That’s our mandate; you could say that’s our contract. Whenever we have doubts that the goal will be reached, we act.”

Politico noted that in his last press conference, ECB chief Mario Draghi described the concept of ‘helicopter money' – which would mean providing cash directly to consumers to boost consumption – as “very interesting”.

However, Coeure said this was not something the ECB was debating.

“To be honest, I don’t see how it could work without some kind of risk-sharing with governments, which could be practically and legally problematic. So whatever my own intellectual interest in helicopter money, as a Governing Council member I have a fair deal of scepticism and circumspection.”