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Mario Draghi’s Negative Interest Rate in ECB under Scrutiny

The former European Central Bank President Draghi introduced subzero interest rates under his leadership. However many bankers and governments are against this negative interest rate policy.

What the present President Christine Lagarde will do towards negative rates continues to bother investors and bankers.

People who are vigilant and save money are the worst hit by the negative rates. Pensioners who depend on this income for their retirement phase are also worried.

Bankers have raised concerns over the impact of negative interest rates in both the U.S. and Europe. This is hitting our profitability say, bankers. Further, it is being advantageous only to wealthy clients and to the corporate world, they say. Small savers continue to be affected by the zero or sub-zero rates.

Bank of Japan has been hit by the sub-zero rates introduced. Savers and zombie companies benefit from these interest rates. Bank balance sheets are damaged and the property market is in a bubble, say experts.

In Sweden, the central bank is expected to raise its interest rates from the sub-zero rates. Though the Scandinavian economy is not very good, it is better to raise interest rates, states the central bank.  If the Riksbank which is the oldest central bank in the world goes through a prolonged period of a negative interest rate, it would hurt the bank, say experts.

Cecilia Skingsley Deputy Governor of Riksbank says that it would be better for a slightly higher policy rate in Riksbank than a lower one.

However, some experts defend the negative interest rates by central banks. The ECB which has subzero rates passes it on to corporate clients who use it in productive investment essential for the country, they say.

Lagarde should hold her ground. If negative interest rates are doing more harm than good, then changes can be implemented. But if there is more good than harm, it would be best for things to continue, say experts.

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