ECB raises rates on government deposits to ease transition
Governments should make “alternative arrangements”, ECB says, after pandemic saw deposits rise
The European Central Bank’s governing council said it was raising interest rates on government deposits to “prevent an abrupt outflow” of funds.
Eurozone governments’ deposits at the ECB have been at a very high level since the onset of the Covid-19 pandemic. The ECB said it wanted these deposits to fall, but the policy aims at preventing an excessively rapid withdrawal amid collateral shortages on repo markets.
The governing council said on September 8 it was temporarily removing its 0%
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