The negative interest rate applied by the European Central Bank, have their limits, said a member of the governing Council of the ECB françois Villeroy de Halo.
Villeroy, who also heads the Bank of France, added that the ECB will maintain its accommodative monetary policy, but stressed that other policy areas must contribute to stimulating growth in the currency Union.
“Negative interest rates is useful but it is only one tool among many others and they have their limits,” said Villeroy.
“The profitability of banks is a very serious problem,” he said. – It is very important that communication between the banks and the ECB remain effective. Currently, the ECB policy should help, not harm the profitability of banks.
Villeroy said that the policymakers of the ECB “carefully choose” the appropriate tools. “Some tools are not acceptable, such as helicopter money,” he explained.
“While monetary policy plays an “important role” in Europe, all other policy areas should also help to ensure stronger and sustainable growth,” said Villeroy. In particular, he called for the establishment of financial and investment Union at the European level and carrying out more ambitious reforms at the national level.