The refinancing rate is what banks pay to borrow from the ECB. That in turn should influence how much banks charge businesses and consumers to borrow. The problem now is banks hurt during the financial crisis are not passing on those lower rates to customers, but charging significantly more to lend money. Under such conditions, another cut to the refinancing rate by the ECB would do little to help the economy.Bank President Mario Draghi and Yves Mersch, the newest member of the bank's six-member executive committee, have said that unconventional measures such as the bond purchases offer were doing more to lower borrowing rates in the real economy than a rate cut would. As the bond-buying offer boosted confidence in financial markets, some banks felt more comfortable charging less for loans.
ECB Expected To Leave Rates At Record Low
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