Draghi Says ECB to Soften Impact of Negative Rates If Necessary

The video tutorial discusses the automatic adjustments in rate guidance and their impact on the reinvestment horizon, which affects long-term interest rates by compressing the term premium. It highlights the need to monitor banks' earning conditions as net interest margins are compressed and suggests reflecting on measures to preserve the benefits of negative rates while mitigating side effects. The tutorial concludes that low bank profitability is not an inevitable outcome of negative rates.

What are the potential side effects of negative rates that need to be mitigated?

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Discuss the relationship between low bank profitability and negative interest rates.

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