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In his latest client note, Thomas Harr, PhD, Global Head of FI&C Research at Danske Bank, discusses whether the European Central Bank’s (ECB) policy easing will help in terms of lifting growth and inflation.

Key Quotes:

The pass-through of a new cut in policy rates to bank deposit rates is likely to be limited, as Eurozone banks are either unwilling or unable (or both) to charge depositors.

This year, yield curves have inverted, which cripples bank profitability due to the banks’ role as maturity transformers, which could damage credit creation.

I believe that monetary easing will have a limited impact in terms of countering negative growth drivers.

I do not believe that monetary easing will help much in terms of lifting actual inflation.”