Negative deposit rates..

We live in the central bank's era. The current domination of  central banks is unprecedented. Earlier they managed the same responsibility , price and finance stability, with limited tools such as twisting short term borrowing and lending rate but now central banks have evolved a lot and they have tried lot of other tools to manage the same responsibility and still results are not coming the way these should have been.

ECB has cut the deposit rates to -0.10 per cent and now deposit rates are Negative. 

We are not sure whether this will work and push the banks to lend money to house holds or business. Banks that were reluctant to lend when rate was almost zero will not find any reason now to lend more with negative deposit rate. They can store cash in their vaults rather than depositing it with ECB or they can pass this cost to customer.It is global capital market and now with negative deposit rate investors or euro zone banks can flee outside to earn the better yields. 

The real purpose of this rate cut could be not about bank lending at all. I think it is about German disinflation and the exchange value of the Euro, Currency War.German CPI inflation is currently 0.9%, far below the ECB’s target of “close to” 2%, and trending downwards. It’s unclear exactly why this is, but one possibility is the strong Euro. Because of Germany’s export dependence, a strong Euro puts downwards pressure on German inflation – indeed this is why historically the Bundesbank, ever the inflation hawk, has preferred a strong currency. As Germany is very dominant in the Eurozone, German disinflation feeds through into low Eurozone inflation.