ECB's Nowotny: Markets 'Clearly' Over-Interpreted Talk of Negative Rates
European Central Bank Governing Council Member Ewald Nowotny told CNBC on Friday that the markets over-interpreted ECB President Mario Draghi's comments on negative deposit rates at Thursday's press conference.
"Well I think the markets over-interpreted this point. Of course, there is always some kind of technical discussion about it but there is no specific plan in that direction," Nowotny said in Bratislava. "I personally think this is something where one really has to analyze very carefully the effects, side effects, psychological effects so this is not something that is of relevance in the immediate future."
The euro jumped against the dollar after Nowotny's comments, rising to a session high of 1.3107.
On Thursday, the euro fell against the dollar after ECB Chief Mario Draghi said the central bank had an open mind about negative deposit rates, to encourage banks to lend rather than park money at the ECB. A negative deposit rate would mean banks would have to pay the ECB to hold deposits.
"On the deposit facility rate, we said it in the past, we are technically ready... And we will again look at this with an open mind and we stand ready to act if needed," Draghi said.
But Nowotny said this was a "very sensitive issue" that would need "much more information, much more analysis than we have available at this moment." He warned it could in fact dry up the flow of credit. "This is one of the possible outcomes," he said.
"It would have effects on the inter-bank market…I would say one should not see this as something that might become realistic in the foreseeable future," Nowotny said.