Could the European Central Bank be Preparing to Break Through the Zero Lower Bound?

  Photo of one of the European Central Bank buildings that I took when I visited. I give full permission to anyone to use this photo as long as they link to this post.

Photo of one of the European Central Bank buildings that I took when I visited. I give full permission to anyone to use this photo as long as they link to this post.

In Brian Blackstone’s November 6, 2014 Wall Street Journal article “ECB Unites on Possible Further Stimulus,” after discussing the planned $1 Trillion euro chunk of balance sheet expansion that is on its way, Brian says this:

The ECB left its main rate—the rate that it charges commercial banks on its regular loans—at a record low 0.05% as expected.

However, Mr. Draghi said ECB staff and committees have been asked to ensure “the timely preparation of further measures to be implemented, if needed.” He added that ECB staff and committees have a proven record of delivering what they have been asked to do, an indication that the ECB is prepared to act on their recommendations if necessary.  

Could these further measures being prepared by the staff include a negative paper currency interest rate (implemented by a time-varying paper currency deposit window at central bank cash windows)? I hope so. Key staff members were certainly there in my ECB seminar on “Breaking Through the Zero Lower Bound” in July.    

Let me say that if the ECB does break through the zero lower bound, those who are influential in making that happen within the ECB will easily deserve a supplysideliberal.com designation as heroes of humanity if they pursue such a policy resolutely, as called for.

Note: My bibliographic post “How and Why to Eliminate the Zero Lower Bound: A Reader’s Guide” now has a section on “News and Trends.”