The ECB in the adventure of negative rates: The NIRP

Christian Bordes

Professeur honoraire des Universités, France

Abstact : The ECB was the first of the G4 central banks to bring its interest rate into negative territory (NIRP, Negative Interest Rate Policy) in June 2014. In the arsenal used by the ECB, it is undoubtedly the most controversial. The aim of the article is to give an overview of this experience. He underlines that the adoption of the NIRP marks, in late 2014 – early

2015, the transition of ECB action to a truly unconventional monetary policy. It is part of the adoption of a new, much more radical, monetary easing strategy, in which the NIRP composes, with forward-looking guidance and an asset purchase program, a triptych in- tended to fight against triggering a deflationary spiral and bringing inflation close to the target set by the ECB. Its transmission mechanisms and expected effects are then presented along with the main lessons from NIRP previous experiences in Sweden and Denmark. Afterwards, a progress report is proposed, with regard to the objective pursued, where the controversy surrounding its effects is exposed, by questioning in particular its consequences for the situation of the banking system in the euro zone. Finally, the main lessons from this real adventure in unknown lands are learned and the difficulties encountered in leaving the NIRP mentioned.

Keywords : monetary policy.

Jel Classification : E52, E58, E65.