Zero lower bound

Central bank asset purchases and auction cycles revisited: new evidence from the euro area

Retrieved on:

星期五, 四月 19, 2024

EADB, Eurozone, Central bank, Exercise, Finance, Selection, Zero lower bound, History, Sale, Empirical evidence, Research Papers in Economics, SDW, Flight-to-liquidity, Money, EONIA, APP, Fleming, Born, AAA, Fiscal, PEPP, Pyrrhic victory, Policy, Research, Breitung, MOSFET, Autocorrelation, Euro, PDF, Classification, ECB, Blog, Dependent and independent variables, Eser, DMO, Impact, PSPP, SMP, Efficacy, AC, QE, Sovereign, Confidentiality, Section 4, MOC, Convention (norm), Data warehouse, Social science, LHS, Control, JEL, Chart, Section 3, Importance, Journal, Bank of France, Role, G14, Government, Capital, The Journal of Finance, Credit, E58, Contagion, Literature, Public sector, DeSantis, Paper, Section 2, European Central Bank, Health, Arnone, Attention, Pressure, NCBS, G12, Journal of Financial Economics, Reproduction, Website, Table, Movement, IMF, RHS, Working paper, Ehrmann, Treasury, Market, Symmetry, Heart, Data, Beck, VIX, Natural experiment, Interval (mathematics), Confidence interval, Medical classification, Security (finance)

Working Paper Series

Key Points:

Working Paper Series
Federico Maria Ferrara
Central bank asset purchases
and auction cycles revisited:
new evidence from the euro area

No 2927

Disclaimer: This paper should not be reported as representing the views of the European Central Bank
(ECB).
Abstract
This study provides new evidence on the relationship between unconventional monetary
policy and auction cycles in the euro area.
The findings indicate that Eurosystem?s asset purchase flows mitigate
yield cycles during auction periods and counteract the amplification impact of market volatility.
The dampening effect of central bank asset purchases on auction cycles is more sizeable and
precisely estimated for purchases of securities with medium-term maturities and in jurisdictions
with relatively lower credit ratings.
On the other hand, central banks may influence price dynamics in these markets, most notably
through their asset purchase programmes.
If so, do central bank asset purchases
affect bond yield movements around auction dates?
Auction cycles are present when secondary market yields rise in
anticipation of a debt auction and fall thereafter, generating an inverted V-shaped pattern around auction
dates.
ECB Working Paper Series No 2927
3

1

Introduction

The impact of central bank asset purchases on government bond markets is a focal point of economic and
financial research.
If so,
do central bank asset purchases shape yield sensitivity around auction dates?
The paper provides new evidence on the effects of Eurosystem?s asset purchases on secondary market
yields around public debt auction dates.
The analysis builds on previous research based on aggregate data
on central bank asset purchases and a shorter analysis period (van Spronsen and Beetsma 2022).
Using
granular data on Eurosystem?s asset purchases offers an opportunity to shed light on the mechanisms linking
unconventional monetary policy and auction cycles.
Given this legal constraint, the study
hypothesises that the effect of asset purchases on 10-year auction cycles is mostly indirect, and goes via price
spillovers generated by purchases of securities outside the 10-year maturity space.
Taken together, these results provide new evidence about auction cycles in Europe and contribute to a
larger literature on the flow effects of central bank asset purchases on bond markets.
Section 4 offers descriptive evidence about auction cycles in the euro area.
Auction cycles are defined by the presence of an inverted V-shaped pattern in secondary market yields
around primary auctions.
That is, government bond yields rise in the run-up to the date of the auction and
fall back to their original level after the auction.
Their limited risk-bearing capacities and inventory management operations are
seen as key mechanisms driving auction cycles (Beetsma et al.
ECB Working Paper Series No 2927
7

Second, central bank asset purchases can alleviate the cycle by (partly) absorbing the additional supply
of substitutable instruments in the secondary market (van Spronsen and Beetsma 2022).
This expectation is
supported by several analyses on the price effects of central bank bond purchases (D?Amico and King 2013;
Arrata and Nguyen 2017; De Santis and Holm-Hadulla 2020).
Empirically, previous research has provided evidence of auction cycles taking place across different jurisdictions.
(2016) detect auction cycles for government debt in Italy, but not in Germany, during the European
sovereign debt crisis.
Research on the impact of central bank asset purchases on yield cycles around auctions is still limited.
Their paper provides evidence
that Eurosystem?s asset purchases reduce the presence of auction cycles for euro area government debt.
Nonetheless, several questions remain open about auction cycles and unconventional monetary policy
in the euro area.
Therefore, they
provide only a partial picture of auction cycles and central bank asset purchases in Europe.
The use of granular data on central bank asset purchases is especially important in light of the modalities
of monetary policy implementation of the Eurosystem.
Altogether, these elements motivate further investigation of the relationship between central bank asset
purchases and auction cycles in the euro area.
Taken together, these results confirm that Eurosystem?s asset purchases mitigate yield cycles during auction periods and counteract the amplification impact of market volatility.
The findings confirm that the flow
effects of central bank purchases on yield movements around auction dates are driven by lower-rated countries.
Additional analyses provide evidence for an indirect effect of purchases on auction cycles and highlight
the presence of substantial heterogeneity across jurisdictions and purchase programmes.
Flow Effects of Central Bank Asset Purchases on Sovereign Bond
Prices: Evidence from a Natural Experiment.
Federico Maria Ferrara
European Central Bank, Frankfurt am Main, Germany; email: [email protected]
? European Central Bank, 2024
Postal address 60640 Frankfurt am Main, Germany
Telephone
+49 69 1344 0
Website
www.ecb.europa.eu
All rights reserved.

Monetary asmmetries without (and with) price stickiness

Retrieved on:

星期五, 四月 19, 2024

Online, University, Public Security Section 9, Employment, Calibration, Small, Equity, Volume Ten, Research Papers in Economics, Policy, A.4, Communication, Crisis, Mass, Silvana Tenreyro, Business, Shock, Intuition, Business cycle, TFP, Volume, European Economic Review, Marginal value, SME, NBER, Forecasting, Depression, 3rd millennium, European Economic Association, Conceptual model, Journal of Monetary Economics, Insurance, Harmonization, Great Depression, CES, Economic Inquiry, Paper, Environment, Political economy, Journal of Financial Economics, MIT, University of York, COVID-19, Behavior, Review of Economic Dynamics, Rigid transformation, Website, Access to finance, Accounting, Working paper, Probability, Total, Appendix, Section 8, Quarterly Journal of Economics, Zero lower bound, Curve, Chapter, Cost, Nominal, Journal of Political Economy, Euro, PDF, ECB, Unemployment, Hoarding, STAT, Economic Policy (journal), Household, Canadian International Council, Social science, Government, Federal Reserve Bank, JEL, Journal, Textbook, Missing, Food, Private sector, A.5, Asymmetric, The Journal of Finance, Credit, Speech, Princeton University Press, Literature, NK, European Central Bank, Growth, Labour, Monetary economics, Loss aversion, Financial intermediary, Injection, Elasticity, Inventory, Subprime lending, Ben Bernanke, Finance, BIS, Phillips curve, International Economic Review, Money, London School of Economics, Marginal product of labor, Pruning, Marginal product, The Economic Journal, Rate, Aswath Damodaran, Risk, OECD, Competition (economics), Section 4, MIT Press, Consumption, Bond, Section 3, Yield curve, Loanable funds, Habit, Cobb–Douglas production function, Economy, Aarhus University, Financial economics, Section 2, Conference, Central bank, Chapter Two, Monetary policy, Capital, Hartman–Grobman theorem, CEPR, Framework, American Economic Review, Capital Markets Union, ZLB, Exercise, Liquidity, Interest, Intensive word form, Workshop, European Commission, Macroeconomic Dynamics, Population growth, B1, Response, Quarterly Journal, Community business development corporation, GDP, E31, Control, Journal of Economic Theory, Christian Social Union (UK), T2M, Hamper, Data, American Economic Journal, Aggregate, Konstantinidis, B.1, A.9, A.6, Remuneration, Civil service commission, EUR, Uncertainty, Motivation, A.7, Bank, GFC, Section 13, Motion, Reproduction, IMF, Staggers Rail Act, Abstract, Tale, Handbook, Asymmetry, Stanford University, Communications satellite

Key Points:

US monetary policy is more powerful in low economic growth regimes

Retrieved on:

星期二, 四月 2, 2024

Tao, Research Papers in Economics, Excess, American Economic Journal, Doan, Policy, RT, Interpolation, Economic growth, Absorption, Business, E32, Low, Browning, European Economic Review, UST, NBER, Forecasting, Macroeconomics, European Economic Association, Journal of Monetary Economics, Journal of Applied Econometrics, TVAR, Oxford University Press, Time series, Economic Inquiry, Paper, Linearity, Joshua Angrist, Nobuhiro, Environment, Political economy, Journal of Financial Economics, Rated R, R2, Website, Emi, Energy economics, Probability, Medical classification, Eurozone, Sigismund, Quarterly Journal of Economics, Zero lower bound, History, Nature, Chapter, ZT, Journal of Political Economy, Bocconi University, OLS, Statistics, University of California, Irvine, PDF, Classification, ECB, XS, ITP, Impact, Estimation, DGP, Mark Thoma, Social science, Elsevier, JEL, Cambridge University Press, Real, M1, Research, Textbook, Private sector, FED, Credit, UTT, Literature, Federal Reserve, Knotek, Evelyn Regner, Table, European Central Bank, Chow, FRED, Monetary economics, Wald, Ben Bernanke, Premium, P500, BIS, EWMA, International Economic Review, Federal funds rate, Money, Treasury, C32, The Economic Journal, Federal Reserve Economic Data, Employment, Risk, FFR, Suggestion, FOMC, Monte Carlo method, Sigmoid, VAR, Database, Projection, Ascari, The Journal of Finance, Yield curve, United States Treasury security, Economy, Fed, Figure, NFCI, Financial economics, EXP, Freedom, Central bank, PCE, Monetary policy, American Economic Review, Exercise, Interest, Samuel, URR, Rigidity, Business cycle, XT, Landing slot, Chap, Daron Acemoglu, Markov, Blue chip, Kuttner, Response, Quarterly Journal, YT, Channel, GDP, Standard, Effect, Federal, Cost, Christian Social Union (UK), Journal of Econometrics, Comm, Mark Gertler, Use, Economic statistics, IW, Bank for International Settlements, Finance Secretary (India), UC, Bank, Reproduction, Section, News, Housing, Data, Food industry

Key Points:

The effect of new housing supply in structural models: a forecasting performance evaluation

Retrieved on:

星期日, 二月 4, 2024

BET, Section 2, Model, XT, CIT, LTV, Forecasting, Total, Bank, RT, Elasticity, GDP, Website, University of Chicago Press, Process control block, Fiscal, Reproduction, University, WTP, Johns Hopkins University Press, E32, Faculty, Writing, KMR, Monetary economics, Household, Root mean square, YT, GFC, Language, VAR, A6, Motivation, Growth, PLT, Hartman–Grobman theorem, Research, House, Observation, Friction, Section 4, Classification, Macroeconomic model, BAA, AP, Kálmán, Odyssean Wicca, Parameter, Blue chip, A5, HPT, Mark Gertler, Learning, Smets, Inflation, ECB, Q2, Trade, CE, Hit, SPF, Review of Economic Dynamics, ZBW, Kolasa, LTM, R21, Patient, Prior, Shock, Movement, ZT, Australasian, M1, Lens, Great, Nobuhiro, European Central Bank, Estimator, Policy, LTI, COVID-19, Attention, HP, Feedback, Goethe University Frankfurt, International Journal of Forecasting, Federal Reserve, Federal Reserve Bank, Behavior, Health, Blue Chip Economic Indicators, Inverse, Zero lower bound, The Blue, Journal of Applied Econometrics, Economic forecasting, Matrix, Economy, Federal, R31, LTP, Chinese Blackjack, WTI, CES, Sim, Bit, Section 5, Capital market, Quantitative Economics, Credit, Motion, Central bank, Journal of Political Economy, Political economy, Taylor & Francis, Journal of Monetary Economics, Act, Binning, CPT, DPT, Point, MCMC, RealTime, Literature, Metropolis–Hastings algorithm, ZLB, TFP, Research Papers in Economics, Del Negro, GBT, Communication, Kalman filter, Markov, Cycle, Business cycle, Eurozone, DFF, PDF, Filter, Medical classification, American Economic Journal, Demand shock, Comparison, Employment, KTEH, Cobb–Douglas production function, Nonprofit organization, Sampler, PTW, Par, Liquidity trap, Paper, Nominal interest rate, QT, Exercise, Monetary policy, RTD, Interest rate, A7, University of Cambridge, Control, Statistics, Posterior, Pressure, American Economic Review, E37, Financial intermediary, Social science, Basel II, Delphic, Depreciation, European Economic Review, HPD, Ai, Calendar, E17, Government, Journal of Econometrics, HTM, Freedom, LTE, Probability, Face, Calibration, Oxford University Press, New Keynesian economics, Sun, HH, Me, Uncertainty, FPI, Production, Dynamics, Handbook, Real estate

Key Points:

Low rates and bank stability: the risk of a tipping point

Retrieved on:

星期五, 十一月 11, 2022

This has spurred academic and policy discussions about the economic implications of such low rates for the banking sector.

Key Points:

This has spurred academic and policy discussions about the economic implications of such low rates for the banking sector.
It develops a model closely based on Allen and Gale (1998) and shows the existence of a critical policy rate level, dubbed the tipping point.
Past the tipping point, an interest rate cut has a negative net effect on bank capital and may indeed result in bank insolvency.
From the model, we learn which bank characteristics matter for the tipping point and how they affect it.
Using these theoretical results, we can use data on banks to quantify the tipping point.
To discuss bank solvency, we need to understand what constitutes the assets of a bank from an economic point of view.
A banks deposit franchise, which is generally not capitalised on bank balance sheets, is also a relevant bank asset.
With this concept of solvency in mind, the question becomes: what is the effect of a low policy rate on bank assets?
Past the tipping point, the deposit-franchise effect dominates and a policy rate cut hurts bank solvency.
Our observed value for average bank asset maturity (4.5 years) implies that a 0.55% policy rate is the tipping point.
[4]
More work is required to obtain a sound quantification of the tipping point, also for the euro area.

Benefits of macroprudential policy in low interest rate environments

Retrieved on:

星期五, 十一月 11, 2022

Short-term interest rates in the euro area and the United States

Key Points:

Short-term interest rates in the euro area and the United States
Notes: Benchmark short-term nominal interest rate (panel A) and natural rate of return (panel B) for the euro area and the United States.
Low levels of the natural rate for protracted periods of time pose challenges for the conduct of conventional monetary policy.
This can happen because the ELB on nominal interest rates precludes the policy rate from tracking the natural rate if the latter falls below the bound.
In economies with low natural rates, such as the euro area today, macroprudential policy can have benefits for the effectiveness of conventional monetary policy, in addition to safeguarding financial stability.
The natural rate which is a risk-free, short-term real interest rate therefore increases as well.
The above benefit points to a novel complementarity between macroprudential policy and conventional monetary policy, which takes place only in environments with low interest rates.
If these conditions hold, macroprudential policy boosts the natural rate above the ELB, and it does so unintentionally, simply as a by-product of safeguarding financial stability.
That is, macroprudential policy still improves the effectiveness of conventional monetary policy, but it does not allow the policy rate to accommodate aggregate demand appropriately without hitting the ELB.
In economies with low natural rates, macroprudential policy can have benefits for the effectiveness of conventional monetary policy, in addition to safeguarding financial stability.
These benefits arise because macroprudential policy boosts the natural rate simply as a by-product of containing systemic risk in financial markets which gives the central bank more room for stimulating aggregate demand, especially during downturns.

The Secure Cash and Transport Association Releases Speaker Lineup and Agenda for 2022 Conference

Retrieved on:

星期二, 九月 6, 2022

PURCELLVILLE, Va. , Sept. 6, 2022 /PRNewswire-PRWeb/ -- The Secure Cash & Transport Association (SCTA) announces the agenda and speaker lineup for its 2022 SCTA Conference, taking place October 5-7 at the Westin Michigan Avenue in Chicago. The annual event supports the association's mission to protect, strengthen, and unite the cash-in-transit and cash-servicing industries.

Key Points:

The Secure Cash & Transport Association (SCTA) released its agenda for the 2022 SCTA Conference, taking place October 5-7 in Chicago.
PURCELLVILLE, Va., Sept. 6, 2022 /PRNewswire-PRWeb/ -- The Secure Cash & Transport Association (SCTA) announces the agenda and speaker lineup for its 2022 SCTA Conference , taking place October 5-7 at the Westin Michigan Avenue in Chicago.
The 2022 agenda features sessions covering critical issues in particular, the pandemic which have impacted the cash industry and trends that will continue to shape the industry moving forward.
Learn more and view the full agenda here: scta.securetransportassociation.org/agenda
The Secure Cash & Transport Association (SCTA) is a non-profit association established in 2013 to represent the shared interests of professionals in ATM servicing, cash handling/processing, transportation, and safekeeping of cash and coin throughout North America.

Isabel Schnabel: Interview with CNBC

Retrieved on:

星期三, 十一月 18, 2020

Monetary policy, Money, Financial services, Banking, Central bank, Inflation targeting, Interest rate, Economic policy, Zero lower bound, Dual interest rates, Benoît Cœuré

INTERVIEWInterview with CNBCInterview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Annette Weisbach, CNBC, on 12 November and aired on 13 NovemberThe ECB Forum is always our big annual event, and we discussed all the big topics that are on the table.

Key Points:

INTERVIEW

Interview with CNBC

Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Annette Weisbach, CNBC, on 12 November and aired on 13 November

The ECB Forum is always our big annual event, and we discussed all the big topics that are on the table.
And both of those are playing a very important role in our ongoing monetary policy strategy review.
And one of the important messages is that life has become more complicated for economic policy, including monetary policy and fiscal policy.
From the central banking perspective, the biggest issue is the long-term decline in the natural real interest rate, which poses challenges.
And these challenges already appeared years ago because interest rates were approaching the zero lower bound, which is now called the effective lower bound.
This makes it difficult for central banks because they can no longer use conventional monetary policy tools and have to use unconventional monetary policy tools instead.
But, as I said in the panel I was chairing today, the unconventional tools have become quite conventional by now.
You have been talking about the possibility of cutting rates further into negative territory.
We have always said that we are going to look at all the instruments.
But there are reasons why we havent reduced interest rates in the past and now we have to check whether these reasons are still valid.
One important argument is the effects that low rates may have on the banking sector.
Therefore, I think we also have to discuss the intensity of our asset purchases, which is also important.
So we have to ask: what is the intensity of purchases that is needed to preserve historically low financial conditions?
Then there are others who are a bit more modest and who say that we should have a clear commitment to symmetry.
And actually, symmetry is already always in our introductory statement, so this would be an easy thing to do.
But youve not yet decided within the Governing Council on which is the best way to formulate an inflation target, right?
We have regular meetings of the Executive Board, and especially of the Governing Council, in order to discuss all the background notes and analyses that are being produced.

Isabel Schnabel: Interview with CNBC

Retrieved on:

星期三, 十一月 18, 2020

Monetary policy, Money, Financial services, Banking, Central bank, Inflation targeting, Interest rate, Economic policy, Zero lower bound, Dual interest rates, Benoît Cœuré

INTERVIEWInterview with CNBCInterview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Annette Weisbach, CNBC, on 12 November and aired on 13 NovemberThe ECB Forum is always our big annual event, and we discussed all the big topics that are on the table.

Key Points:

INTERVIEW

Interview with CNBC

Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Annette Weisbach, CNBC, on 12 November and aired on 13 November

The ECB Forum is always our big annual event, and we discussed all the big topics that are on the table.
And both of those are playing a very important role in our ongoing monetary policy strategy review.
And one of the important messages is that life has become more complicated for economic policy, including monetary policy and fiscal policy.
From the central banking perspective, the biggest issue is the long-term decline in the natural real interest rate, which poses challenges.
And these challenges already appeared years ago because interest rates were approaching the zero lower bound, which is now called the effective lower bound.
This makes it difficult for central banks because they can no longer use conventional monetary policy tools and have to use unconventional monetary policy tools instead.
But, as I said in the panel I was chairing today, the unconventional tools have become quite conventional by now.
You have been talking about the possibility of cutting rates further into negative territory.
We have always said that we are going to look at all the instruments.
But there are reasons why we havent reduced interest rates in the past and now we have to check whether these reasons are still valid.
One important argument is the effects that low rates may have on the banking sector.
Therefore, I think we also have to discuss the intensity of our asset purchases, which is also important.
So we have to ask: what is the intensity of purchases that is needed to preserve historically low financial conditions?
Then there are others who are a bit more modest and who say that we should have a clear commitment to symmetry.
And actually, symmetry is already always in our introductory statement, so this would be an easy thing to do.
But youve not yet decided within the Governing Council on which is the best way to formulate an inflation target, right?
We have regular meetings of the Executive Board, and especially of the Governing Council, in order to discuss all the background notes and analyses that are being produced.

Philip R. Lane: Low inflation: macroeconomic risks and the monetary policy stance

Retrieved on:

星期四, 二月 13, 2020

Economy, Money, Inflation, Deflation, Monetary policy, Interest rate, Real interest rate, Central bank, Zero lower bound, Macroeconomics, Monetary inflation, Yield curve

SPEECHLow inflation: macroeconomic risks and the monetary policy stanceKeynote speech by Philip R. Lane, Member of the Executive Board of the ECB, at the financial markets workshop of the Economic Council (Finanzmarktklausur des Wirtschaftsrats der CDU)[1] More recently, anti-inflationary shocks have dominated and addressing excessively-low inflation poses new challenges.

Key Points:

SPEECH

Low inflation: macroeconomic risks and the monetary policy stance

Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, at the financial markets workshop of the Economic Council (Finanzmarktklausur des Wirtschaftsrats der CDU)

[1] More recently, anti-inflationary shocks have dominated and addressing excessively-low inflation poses new challenges.
In my remarks today, I therefore plan to focus on the conduct of monetary policy when inflation is below target and explain why the ECB is maintaining an accommodative monetary policy stance.
I will also discuss why it is necessary to adopt unconventional monetary policy measures when the conventional monetary policy instrument the central banks policy rate is constrained.

Macroeconomic risks of excessively-low inflation

One danger is that low inflation that persists over the longer term provides only a small buffer against deflation: if inflation is low, it only takes a relatively small shock to tip the economy into deflation.
However, even in the absence of pronounced risks of deflation, there are substantial macroeconomic costs to persistently undershooting the inflation objective.
First, excessively-low inflation can hamper beneficial macroeconomic adjustments.
[3] Let me give the intuition with a stylised example: the nominal policy interest rate is the sum of inflation and the real interest rate.
If inflation is stable at 2 percent, then the nominal policy interest rate also stands at 2 percent.
This is compounded if a prolonged period of low inflation also erodes inflation expectations, since a persistent fall in inflation expectations itself further reduces the available policy space through the associated downward pressure on the yield curve.
Prolonged low inflation risks dragging down inflation expectations which, in turn, further impairs the capacity of central banks to quickly restore inflation to the target.
[6] The lessons from this period and the more recent experience of prolonged deflation in Japan have encouraged the adoption of monetary policy strategies worldwide that seek to deliver sufficiently positive medium-term inflation rates, given the macroeconomic risks associated with excessively-low inflation and deflation.

The contribution of non-standard measures to monetary policy capacity

The use of non-standard measures to augment monetary policy capacity has been widespread across central banks in recent years.
Bringing the policy interest rate to negative levels extends the scope to influence short-term funding conditions and also longer-maturity elements in the yield curve.
In fact, since 2014 we have seen that rate reductions in negative territory propagate in qualitatively different ways than rate reductions implemented at positive levels.
A cut below zero demonstrates that the central bank is not mechanically constrained by a zero lower bound.
If a central bank cuts its policy rate to zero but excludes moving into negative territory, the distribution of expectations of future interest rates becomes skewed.
As a result, interest rates at longer maturities tend to decline by less than the adjustment to the policy rate.
[10] Taking the APP, negative rates and rate forward guidance together, ten-year sovereign bond yields would have been almost 1.4 percentage points higher in 2018 without those measures.

The monetary policy stance and the banking system

The evidence shows that the accommodative monetary stance has been effective in encouraging banks to provide more credit and firms to boost investment.
[12],[13] In terms of the effectiveness of the monetary stance, a countervailing factor is that the negative policy rate can mechanically weigh on the net interest income of the banking system, since banks typically do not pass on negative rates to most retail depositors.
It is also important to recognise the overall impact of the monetary policy stance on bank profitability.
In relation to funding costs, the banking system has benefited from the decline in wholesale rates, lower yields in the issuance of bank bonds and TLTRO funding.
[16] In addition, the support provided by our monetary stance boosts the level of economic activity, generating higher lending volumes and lower default rates, both of which support bank profitability.
Nonetheless, the Governing Council closely monitors the risk that the impact of negative rates on bank profitability may impair the transmission of monetary policy to the real economy.

Zero lower bound

Interview with CNBC

Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Annette Weisbach, CNBC, on 12 November and aired on 13 November

Interview with CNBC

Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Annette Weisbach, CNBC, on 12 November and aired on 13 November

Low inflation: macroeconomic risks and the monetary policy stance

Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, at the financial markets workshop of the Economic Council (Finanzmarktklausur des Wirtschaftsrats der CDU)

Macroeconomic risks of excessively-low inflation

The contribution of non-standard measures to monetary policy capacity

The monetary policy stance and the banking system

Concluding remarks