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EUR Rates Flash
Some ECB Governing Council members raised concerns regarding possible unintended consequences of a tiered deposit system in the monetary policy accounts from the July 2019 meeting. We wrote one week ago that a poorly designed tiered deposit system could result in unintended monetary tightening, higher market rates in countries with low bank reserves. Even €STR might fail to follow the Deposit Facility Rate (DFR) sufficiently lower. Now it seems that the ECB rate cut was effectively only about 7bp. Pre-€STR has been trading about 5bp below the ECB’s DFR. The period since mid-March 2017 has been featured by a ... (full story)