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ECB should consider how to ease side effects from negative rates - Villeroy

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ECB should consider how to ease side effects from negative rates - Villeroy
FILE PHOTO: European Central Bank policymaker Francois Villeroy de Galhau, who is also governor of the French central bank, attends the Paris Europlace International Financial Forum in Tokyo, Japan, November 19, 2018. REUTERS/Toru Hanai/File Photo   -   Copyright  Toru Hanai(Reuters)
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PARIS (Reuters) – The European Central Bank needs to consider ways of keeping the advantages of negative interest rates while also easing potential side-effects, ECB policymaker Francois Villeroy de Galhau said on Thursday.

Speaking at the Bank of France where he is also governor, Villeroy said that since deflationary risks had subsided, there was no need to go more negative on interest rates.

The combined effects of unconventional monetary tools like negative interest rates may have evolved over time since they were introduced in recent years, he added.

“Mario Draghi rightly stressed that we need to further monitor the bank lending channel and to reflect on possible measures that we can take to preserve the favourable implications of negative rates for the economy, while mitigating their possible side effects,” Villeroy said.

With growth risks on the rise, ECB President Mario Draghi said on Wednesday that the ECB could delay an interest rate hike and may consider ways to limit the side-effects of negative interest rates.

Negative interest rates are unpopular with banks because in essence it means they have to pay when they park funds overnight at the central bank.

(Reporting by Leigh Thomas; Editing by Sudip Kar-Gupta)

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