FRANKFURT: The European Central Bank cut the interest rate it pays to banks on their minimum reserves to zero, seeking to reduce the amount it pays out after an unprecedented increase in interest rates, it said on Thursday.
The ECB was previously paying a rate equal to the deposit rate, which was raised to 3.75% in a widely expected decision on Thursday.
“This decision will preserve the effectiveness of monetary policy by maintaining the current degree of control over the monetary policy stance,” the ECB said.
“It will improve the efficiency of monetary policy by reducing the overall amount of interest that needs to be paid on reserves in order to implement the appropriate stance,” the ECB added.
The ECB requires supervised banks to hold deposits on accounts with their national central banks, which have been positively remunerated until now.
Average reserve requirements in the current period total 165 billion euros, according to the ECB’s liquidity analysis, whereas excess liquidity totals 3.6 trillion euros.
The ECB said it plans to provide more information on the change in a 1345 GMT press release.
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