European Central Bank Governing Council member Luc Coene suggested Thursday that any next move on interest rates would see negative rates on the deposit facility.
Speaking to reporters on the sidelines of the 200th anniversary conference of the Dutch National Bank in Amsterdam, Coene also said that action may come as soon as next month.
“If you cut you should cut both and bring the whole corridor down,” Coene said. He added that he thinks there is a consensus on this position on the Council.
Just cutting the main refi rat is not “going to change anything if you only cut the main refinancing rate. That will not have sufficient impact on markets.”
Hinging on April’s inflation data, such a move could come as soon as May, Coene suggested.
“If wee have again negative surprises in the April number that may indeed push for earlier action than if we have more neutral numbers without negative surprises. than we have some more time,” Coene said.
The key question and debate on the Council is what is driving weak inflation pressures.
“The research of the ECB has shown that there is a large component that is demand driven and if it is demand driven of course that means that we need to do more action and that we need to look at further moves that we should undertake in terms of low interest rates and more non-conventional measures,” Coene said.
“My feeling is that we are underestimating the structural elements,” he said.