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European Central Bank (ECB) Vice President Vitor Constancio said in a speech on Wednesday that there were limits of negative interest rates.
"There are clear limits to the use of negative deposit facility rates as a policy instrument," he said.
"First, there is always the possibility of hitting the limit where the preference for cash withdrawals would set in. Second, the instruments should not push banks to pass on their additional direct costs by turning deposit rates negative or increasing lending rates to increase margins," Constancio added.
The ECB vice president defended the central bank's negative interest rates, saying that the result would be positive for the Eurozone as a whole. He added that time was needed for the recent ECB's stimulus measures "to fully materialize".
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